Dismal Scientist 2020

DISMAL SCIENTIST

The Marshall Society Magazine 2019/20

Issue 004

Auctioning off the electromagnetic spectrum

Paul Milgrom on the most ambitious project of his career so far

Behavioural economics and racial bias

The UK-Australia trade deal

Looking back at Enron’s collapse

Essay competition highlights

Student politics: Three societies lock horns over six of today's toughest questions.

Who gets your vote?

16

COVER: Paul Milgrom interview

20 Fashion industry: The big questions

4 6 82 78

Letter from the Editor

Presidential Messages

12 8 23 38

COVER: Racism & Behavioural Economics

Rob MacLennan

COVER: Enron's Collapse & Regulatory Failure

Fee Robinson

COVER: The UK-Australia Trade Deal

Edward Furst

Brexit: Discontent from Forgotten Regions

Keyi Yu

References

People Behind the Issue

32 36 63 66 69 74

Quarantine Conversations Interviews in Lockdown

Jason Reed on British Conservation Alliance, Extinction Rebellion & Nuclear Energy

Andrew Chang on Curriculum Reform & Economic Pluralism.

COVER: Essay Competition

Economic Growth: Autocracy vs Democracy

Xinyi Qu

Behavioural Economics & Climate Change

Archie Bowman

Consequences of AI & Robotics

Anthony Shorrocks

Keynes & The Treaty of Versailles

Joanna Nowinska

Letter from the Editor

Ihope this finds you all well in what has been a difficult year so far. The process of putting the Dismal Scientist together has been a long and challenging one, not helped by the chaos whipped up by the COVID-19 pandemic, so the completion of the magazine is greatly rewarding.

Whilst it has been difficult, I have thoroughly enjoyed it. I have had the great privilege of working with many writers who have explored ideas that excite and inspire them. The product of their work is an edition that contains such a wide range of content, everyone will find something of interest. Many important issues are tackled, including the climate crisis and how behavioural economics can deal with racial bias.

Another highlight is an interview with Paul Milgrom, who visited Cambridge last November to deliver the 2019/20 Marshall Lecture to a packed lecture hall. He spoke to me about the biggest job of his career and how he co-founded a company with Silvia Console Battilana, a former graduate student of his who is now CEO of their company.

Last year, my predecessor wrote that he was certain that the Dismal Scientist would continue to be a good platform for the expression of students’ ideas. I believe he will feel his trust is validated after reading this edition. In addition to the usual articles and features, the magazine contains a section where several political societies give their opinions on six politically charged economic issues. I hope this stimulates constructive debate and discussion, which is invaluable in a world where politics is increasingly polarised.

This varied and ambitious edition of the Dismal Scientist shows that it remains a flagship project of the Marshall Society. Going forward, I wish the best of luck to the new Editor-in-Chief, George Baxendale, and the new Deputy Editor, Atiyu Mehta.

Enjoy the magazine.

Patrick O'Keefe Editor-in-Chief

Presidential Messages

The President's Final Word

Iamdelighted to have overseen the Marshall Society this year and I am proud of the society for bringing together and engaging economists in thought-provoking discussions and opportunities. I hope this issue of the Dismal Scientist will give a glimpse into the packed and insightful year the Marshall Society had.

One of this year’s highlights was our annual conference held for sixth-form students, this year titled ‘Divergence’, held the day after the UK exited the EU. Quite how appropriate the theme of the conference turned out to be. We did not realise at the time of planning it and it resonates even more so today. The conference and our speakers events allowed us to talk about the biggest challenges the world faces today. From inequality and migration to climate change, we engaged economists and non-economists alike through collaboration with many of the university’s societies. We heard from economists and leaders in the field: Sir Charles Bean, Former Deputy Governor of the Bank of England, Lord Skidelsky, one of the most renowned British economic historians, to name but two. A particularly highlight of our line-up for me was the inspirational message from Lady Barbara Judge. We also hosted our first ever panel on Experimental Economics, which proved a great success.

With huge thanks to our sponsors, we were able to provide engaging and insightful career-orientated opportunities to our members, as well as social events to bring together like-minded, curious individuals.

I would like to thank the outgoing committee for their har work that brought to fruition such a vibrant line-up of events and wish the incoming committee all the best for the forthcoming year. I look forward to the Marshall Society being continually able to provide a platform for insightful discussions during these challenging times.

Katie Zorova President 19/20

Our Incoming President

From talks on sustainable finance to debates on where economics is headed, last year has been an exciting period for The Marshall Society. However, due to current unprecedented times, the Society has moved online for the first time in its 93-year history. We have commenced with the Coronanomics series, hosted and streamed live by Mark Littlewood and Will Hutton, who have discussed in depth the implications of the COVID-19 outbreak on the British economy and impact it may have in future years to come. This has set the tone for a series of timely and highly essential talks organised by the Marshall committee who are striving to work hard and push boundaries in delivering high-quality content.

Furthermore, Marshall is first and foremost a society dedicated to furthering economic discussion and debate beyond Tripos. The committee is working hard to bring higher engagement of our members with the economic affairs of today. 2020-2021 will see a more extensive range of speakers, from Nobel laureates and leading academics to central bankers and top politicians, discussing a wide variety of topics such as auction theory, the industrial revolution, capital markets and neoliberal economics. Last year, the Society celebrated the centenary of a pivotal book and remarkable Cambridge figure: Keynes’s ‘The Economic Consequences of the Peace’ alongside the Institute for New Economic Thinking and many major international institutions. This comes at a particularly apt time, as much of Keynes’s Carthaginian peace may be considered a looking glass for today’s current state of affairs.

The Society is also dedicated to not only connecting our members with economic discussions and debates; but also, with each other and non-economists. In the past few years, the committee has collaborated and co-hosted events with the Engineering Society, Physics Society, Algorithmic Trading Society and The Wilberforce Society to extend our scope. In addition, the Society plans to host the 2021 Marshall Society Conference online, centring around Behavioural Economics and Finance. There will also be a greater focus on online social events, and in the near future, the committee hopes to return to Marshall’s traditions of holding its Annual Ball and Garden Party. Lastly, we will continue to develop our alumni association, aimed at connecting past members with the present. Aside from allowing alumni to keep in touch, this shall serve as a platform for current members to contact and benefit from the experiences of those who have studied before us.

The committee and I are very excited about the upcoming year. We hope to, through The Marshall Society, inspire greater economic conversations and to introduce members to new ideas and issues in the real world beyond the theoretical models that we study. I would like to take this opportunity to thank our wonderful members for their support in making Marshall a truly exceptional society and would like to extend my heartfelt gratitude and congratulations to the outgoing committee for their accomplishments and hard work. I am sure that 2020-2021 at The Marshall Society will not disappoint.

Yasmin Begum President 20/21

Racism & Behavioral Economics:

Not all biases are created equal

Insights from behavioural economics could be pivotal in combating systemic racism. But without acknowledging the dominance of racial biases, existing discrimination could worsen.

Rob MacLennan

2020 will be a year that stands out in history books. Not only for the Covid-19 pandemic that has shaken the global economy and caused the biggest recession in the UK for over 300 years, but also for the widespread protests across America and the world sparked by the brutal police killing of George Floyd, an unarmed black man. The murder triggered the release of pent-up anger towards the systemic racism which has persisted for centuries and is experienced by millions of people from minority backgrounds the world over.

If we hope to bring about racial justice in society, then different areas of academia must play their role in identifying the root causes of persistent racism and, more importantly, designing solutions that work in practice. Economics must rise to the challenge, with the sub-discipline of behavioural economics particularly well placed to play an important role in fighting systemic racism.

Behavioural economics aims to integrate insights from psychology and neuroscience into economic theory, identifying situations where human decision-making is predictably irrational in that it deviates from the utility-optimising behaviour assumed in orthodox economics. However, behavioural economists have often tended to ignore research from social cognition theory, which has shown that economic decision-making is often discriminatory, with people systematically making ‘irrational’ decisions by unconsciously yielding to racial stereotypes. Alarmingly, there is evidence that implicit racial biases can be so strong that at times they trump the supposedly race-neutral cognitive errors described by behavioural economists, thus undermining their predictions and policy recommendations.

To understand the importance of the implications, let us consider the decision-making of a juror, who knows that the victim survived an attack, in an attempted murder trial. The hindsight bias, a well-

established phenomenon in behavioural economics, shows that people overestimate the likelihood of a particular outcome when they already know that this outcome occurred. Therefore, the juror is likely to overestimate the probability of the victim surviving the attack, as they know that the victim did in fact survive. Since ‘intent to kill’ is a key element of an attempted murder crime, no matter how hard the judge tries to offset the effects of the hindsight bias, jurors will overestimate the chances of the victim’s survival, and therefore may be more likely to acquit the defendant.

However, if the perpetrator is a young black male, jurors may be less likely to be influenced by the hindsight information (that the victim survived) because they are more influenced by the racial stereotype of the perpetrator as an aggressive killer than by the hindsight bias. Indeed, one study found that mock jurors were significantly more likely to believe that a crime victim would die when shot by a black perpetrator compared to a white perpetrator. Therefore the hindsight bias will result in extra acquittals for white defendants, while racial stereotypes will counter the hindsight bias relating to black defendants. While this is just one example, the dominance of implicit racial biases throughout judicial systems explains why, in the United States, black offenders receive sentences that are 10% longer than white offenders for the same crimes, and are 20% more likely to be sentenced to prison than white defendants.

If behavioural economists advocate policies aimed at accounting for systematic cognitive biases such as the hindsight bias, without also carefully taking into account the dominating nature of implicit racial biases, it could exacerbate this problem and result in even more unfair outcomes. However, behavioural economics is already in a position to make helpful contributions to the fight against racism when directly applying well-established principles

to designing solutions.

On the European front during World War II, the U.S. Army was still segregated, with only whites serving in combat roles. However, high casualty rates forced General Eisenhower to ask for black volunteers for combat duty. Afterwards, when Harvard sociologist Samuel Stouffer surveyed troops on their racial attitudes, he found that whites whose companies had been joined by black platoons showed dramatically lower racial prejudice and greater willingness to work alongside blacks than those whose companies remained segregated.

This is a good example of what behavioural scientists call ‘cognitive dissonance’, a phenomenon that people unconsciously experience when their beliefs and behaviour are out of sync. When this happens, people have a strong tendency to ‘correct’ this dissonance by changing either their beliefs or their behaviour. Therefore, if people are prompted to act in ways that support a particular view, their opinions will shift to align with this view. In the same way that the white soldiers who fought alongside black soldiers as equals in WWII found their attitudes towards black people shift in a positive way, racially prejudiced views and behaviour today can be combatted today by ‘nudging’ people into behaving in ways that counteract racial biases. When this behaviour causes cognitive dissonance to kick in, unconscious biases are diminished or even disappear.

College recruitment programmes targeting minorities are a good example of cognitive dissonance being applied successfully to and increase diversity in the workplace. When invited to participate in these schemes, managers often do so willingly, making college visits with a determination to come back with strong candidates from underrepresented groups. Cognitive dissonance soon kicks in—and managers who may have been previously sceptical about diversity become converts. The effects are striking. A study conducted by Frank Dobbin of Harvard University found that five years after companies implemented a college recruitment program focused on minority recruitment, the proportion of black male managers rose by 8%, and black female managers by 9%.

A different approach proposed by behavioural economists to reduce the impact of unconscious racial biases is to limit their role in decision making altogether. Eliminating biases is very difficult, and even

when people undergo training that makes them aware of their unconscious biases, researchers have found that this makes little impact on their subsequent behaviour. This is because it is very hard to re-train the brain to remove prejudices that have been reinforced over a lifetime. Therefore, it may be more effective to carefully design systems that nudge people to make decisions in a thoughtful and deliberative way, rather than based on automatic reflexes that are prone to unconscious racial bias. For example, bias can be removed from the recruitment process by getting rid of names, postcodes and demographic information from job applications to stop recruiters falling prey to racial or gender biases, forcing them instead to consider each applicant entirely on merit.

While insights from behavioural economics can clearly be applied in useful ways to diminish the impact of unconscious racial bias, we must consider that theoretically sound policies may not work, and may even be harmful, in practice. For example, the ‘Ban the Box’ (BTB) policy advocated by former US President Barack Obama was designed to increase

the chances of a person with a criminal record being invited to interview for a job by eliminating the box that applicants must check in an initial job application to indicate whether or not they have a criminal record. Roughly 40% of black men in America aged 18-64 have a felony conviction, compared with approximately 10% of white men, and it was expected that the BTB policy would reduce the number of black people being unfairly discriminated against in job applications.

However, when implemented across 35 US states and all federal agencies, the policy had the unintentional impact of reducing the employment of black people.

When information about criminal history is removed, some employers guess or estimate the likelihood of an applicant having a criminal record based on their perceived race. This means that black men without a criminal record are harmed, as some employers assume they are much more likely than

Whites whose companies had been joined by black platoons showed dramatically lower racial prejudice and greater willingness to work alongside blacks.

white applicants to have a criminal conviction (shown in the chart above). As a result, a policy designed to prevent the unfair treatment of black people in the recruitment process inadvertently increased discrimination. A 2017 study from Amanda Agan and Jennifer Doleac found that the net effect of BTB was to reduce employment for young black men without a college degree by 5.1%, with that effect growing over time.

Behavioural economics can make a positive contribution to tackling systemic racism but theoretically sound policies must be very carefully designed and tested before being implemented on a large scale, to avoid the possibility of worsening existing discrimination. Additionally, behavioural economists must start to incorporate unconscious racial biases into their models, especially when they dominate and undermine the well-established cognitive biases at the centre of behavioural scholarship. ▪

The ‘Ban the Box’ (BTB) policy advocated by former President Barack Obama had the unintentional impact of reducing the employment of black people.

Source: Agan & Star (2018), Ban the Box, Criminal Records, and Racial Discrimination: A Field Experiment

The Greatest Regulatory Failure

Thirteen years on, Fee Robinson revisits the collapse of energy giant Enron and the failures of its regulators.

Regulation is a controversial topic; does it stifle economic development or create a truly competitive market? Regardless of your opinion, we can all agree that fraud should be prevented, yet the largest fraud in history went on for 16 years ignored, and at times was actively approved by the regulators.

Enron was an energy company founded in 1985 that turned energy into a commodity to be traded on the stock market. But while their annual reports showed sky-high profits, the reality was dire. The company’s misdeeds, outlined in this article, eventually caught up to them in 2001. This led to the largest bankruptcy in history at the time, the destruction of one of the world’s biggest accounting firms, one suicide, and multiple convictions for fraud, one of which sent the CEO to prison for 15 years.

While some argue this is a tale of anomalous corporate greed, I argue the reality is an unprecedented government failure to implement smart regulation.

Part 1: Mark to Market Accounting

In 1989 Enron enacted a policy of ‘mark to market’ accounting. Mark to market accounting has historically been used by firms that trade futures as it reflects the market price as opposed to the book price of the firm’s assets. For Enron, however, it meant when deals were signed on new power plants they could write down the projected profits from that plant as actual profits, regardless of whether those profits were produced or even if the plants were ever completed. This accounting method was approved by the Securities and Exchange Commission (SEC).

This approval marks the first major regulatory fault in the torrid history of Enron. While 'mark to market' accounting need not be illegal, it should invite regulatory interest. It is a system that is naturally open to abuse when companies can decide their own value and create cash flow figures from subjective modelling, not objective accounting.

With fake cash flow figures, Enron appeared to be above water and significantly profitable in their reports to investors. This drove investor confidence and pushed up their share price; since board members held thousands of shares each, this built up many personal fortunes.

The SEC had, and still has, the power to ban or more carefully regulate 'mark to market'. This power was bolstered under the Sarbanes-Oxley Act (SOX) passed in the wake of Enron’s fraud. The act requires more transparent accounting under which the SEC could mandate when and why 'mark to market' accounting could be used. Instead, we have seen 'mark to market' accounting grow. It was in the spotlight again in 2008 when it was pointed at as the reason why banks could continue to appear profitable even when they were losing millions. Despite these incidents in 2009, the Financial Accounting Standards Board (FASB) eased the rules on 'mark to market' accounting.

To this day firms can report projected profits as actual profits and, although SOX makes it more difficult to outright lie, the downright complexity of profit forecasting under 'mark to market' still leaves

many investors in the dark as to a company’s true value. Perhaps one can question the will of our regulators to prevent fraud.

Part 2: Manipulating Weak Regulators

In 1997, California scrapped its energy price caps in favour of a more highly-privatised energy market. Enron had spent millions lobbying for this change and it was not long before they saw a return on their investment.

Through 2000 and 2001, Enron purposely created congestion on the power lines of California and ordered their power stations to shut down to restrict output and surge electricity prices. California even declared a State One Emergency due to low power supplies. Rolling blackouts in California continued while Enron raked in $254 million gross profits from their West Coast operations.

California could not investigate Enron; they relied on intervention from the Federal Energy Regulatory Commission (FERC) who were told by the Bush administration not to intervene. Bush commented that “intervention would not solve anything”.

It should be noted at this point that Kenneth Lay, Enron’s founder, donated $365,410 to the election of George H.W Bush and used Enron’s corporate jet to fly out Bush’s parents to his inauguration. George H.W Bush even referred to Kenneth Lay as “Kenny Boy”.

It would not be until June 2001 that FERC would re-institute price caps to end California's energy crisis. FERC’s investigation into the rolling blackouts lasting nearly one and a half years concluded that off-peak surges were the cause of congestion.

It is not likely this was corruption on the part of FERC but rather the result of a weak regulatory agency: FERC went into an era of deregulation with only the tools to control a regulated market. They had not considered that manipulative activity would occur and as such FERC did not collect transmission data because they trusted the companies to provide it accurately. Enron did not, nor did FERC have models or even definitions of what would constitute manipulative activity.

A regulated market trips firms up so easily it can be prohibitive, but an unregulated market lets firms push boundaries and, as profit maximisers, it is logical that they will push the boundaries towards fraud if they can get away with it. Former regulators must become law enforcement agencies to deal with such

$254 million in profits from the West Coast whilst California suffered blackouts.

occurrences. The Energy Policy Act of 2005 finally gave FERC the authority to deal with the manipulation of energy markets and by 2016 they had handed out $1.2 billion in penalties.

Although FERC has seen huge gains in its ability to hold energy suppliers to account, there is still no clear legal mechanism or precedent for deregulation that ensures that, as a market is deregulated, oversight is maintained to prevent fraudulent activity so no company lies outside the jurisdiction of regulatory and criminal oversight. Trusting in firms does the public little good.

Part 3: Naive trust

In 2001, it was not the auditors that began to blow the whistle on Enron but reporters like Bethany McLean, who wrote an article for Fortune titled "Is Enron Overpriced?". It would not be until October that the SEC began an inquiry into Enron after another article, this one by John Emshwiller and Rebecca Smith, which detailed how Enron’s accounting and strategic structuring of debts showed it to be much more profitable than it really was.

While it was auditors who saw debts and non-profitable assets transferred to shell companies, it was journalists who blew the whistle. But when incentives are considered this makes sense. Arthur Anderson (Enron’s accountants) received $25 million in audit fees and $27 million in consulting fees. With so little regulatory oversight, it is not surprising that Arthur Anderson found it figured it more advantageous to lie for Enron than report them and lose them as customers.

14-year prison sentence for CEO Jeffrey Skilling.

Arthur Anderson routinely took accountants off Enron’s case when they raised concerns, jeopardizing their livelihood. Any kind of repercussions for individuals relied on being caught by a regulatory agency that failed to notice America’s seventh largest company was a scam, so it is no surprise that when faced with this incentive structure, individuals often lied.

Strengthening regulators not only helps to catch perpetrators but can also be preventative by balancing the disincentive to deceive with the incentive.

SOX set up the Public Company Accounting

Oversight Board to regulate auditors; but in 2019 only 17 firms of 1,730 experienced any kind of sanction, so it is either an incredibly effective deterrent or an ineffective agency.

21000 employees lost their jobs with Enron's collapse

A final word

In 2001 Enron went bankrupt despite having $62 billion in assets. Shares that once sold for $90 crashed to 61 cents and 21,000 employees lost their jobs. Arthur Anderson, which was one of the big five accounting firms at the time, also went bankrupt and was convicted of obstruction of justice for destroying one ton of Enron documents, though this conviction was overturned by the Supreme Court. Jeffrey Skilling, the CEO that oversaw many of the practices outlined in this article, was released in February 2019 from federal prison following a 14-year sentence. It is said he is looking to enter the world of blockchain investing.

While you may argue that it’s been 19 years since Enron and we haven’t seen it happen again, I argue it is only a matter of time. Many of the changes to regulatory systems were specific to the sectors Enron operated in or merely inconvenient to those wanting to defraud investors. Andy Fastow, the architect of Enron’s accounting structure, agrees. In 2015 he said of malicious accounting "Most companies do not do it to the extent that I did it at Enron, so they don't suffer the consequences like we suffered, but companies do it to varying degrees."

Others may say that I am advocating for massive levels of regulation that would kill the free market - I am not. I merely believe we need to be smarter with regulation. We need to know that investors aren’t at the mercy of companies which manipulate their own accounting methods, that regulators are equipped to deal with the most basic task of fighting criminal and regulator misconduct, and we need to know that when a company is held to account, they’re not paying their own investigators. ▪

HOUSTON: Home to Enron's Headquarters

TV Personality

Paul Milgrom talks to the editor about business partners, future plans, and redistributing rights to the airwaves.

Dr Paul Milgrom is a pioneer.

After earning his undergraduate degree from the University of Michigan in 1970, he worked as an actuary before enrolling at Stanford University for his graduate studies. Since obtaining his PhD he has pushed boundaries in game theory, market design, industrial organisation, and financial theory.

The depth of his work on auction theory means his name is often in the mix when discussing future Nobel prize winners.

Ever the innovator and businessman, Milgrom has used his ideas and expertise to design auctions and offer a consultancy service.

The theory and practice of such market design was the topic of this academic year’s Marshall Lecture that Milgrom delivered in Cambridge. Fortunately, he has found half an hour in his busy schedule to speak with me before heading back to the United States.

“We’re bringing together economics and engineering in a new way!”, he announces, referring to his work on designing the first incentive auction for the Federal Communications Committee (FCC). His company, Auctionomics, of which he is co-founder and chairman, obtained authorisation for the contract in 2012. The company describes itself as “a high stakes auction consulting and software firm offering simple, innovative, and economically sound solutions to complicated problems.”

What inspired the creation of the company back in 2007? “Well I had done a fair amount of consulting independently before, and originally it was just a profit motive. [It] was founded with the idea that some of my ideas about how market designs could be coded and then demonstrated in software. It didn’t work out that way but that’s how we started out.”

Recently, successfully developed and carried out the incentive auction. In simple terms, the incentive auction had two parts connected by a repacking process. A reverse auction was used to set the price at which television broadcasters could sell their electromagnetic spectrum rights. That is, sellers bid the amount they were would be willing to sell for and the lowest bidder wins. In the repacking process, remaining television channels were reorganised to create two distinct blocks of spectrum. One for television and one for wireless broadband. The price paid for rights to part of the broadband block was then determined using a forward auction. That is, buyers can bid continuously and the highest

bidder wins. The amount of spectrum that was repurposed was determined by the overall auction system. For a much more thorough explanation, Dr Milgrom’s two Marshall Lectures on this topic are available to view on the Cambridge Faculty of Economics website.

The telecommunication and media industries are highly dynamic, so will changing relative demand for the electromagnetic spectrum make another reallocation necessary in future? Milgrom thinks so. “Reallocations happen all of the time”, he explains. “There are other reallocations happening right now, the c-band which is used for satellite downlink, fibreoptic cables, and the electromagnetic spectrum for 5G, so I do think there will be such operations in future.”

I ask if he would use the same system as for the recent incentive auction or if he would make some improvements on his design. “There will be some improvements we can make on that system but the incentive auction we designed was very closely tailored to the particular problem we had. We had a problem where we were clearing a bunch of independent television stations where the remaining stations can keep their coverage area.” If the problem changes then so must the auction.

Having devoted his academic life to auction theory and its business and engineering application, I ask if Milgrom thinks this should be a prominent part of the economics curriculum at university. “As an advanced course, right? It’s not part of the

fundamentals, but as an advanced course, it belongs at university level. I teach it to my own students at Stanford University, both undergraduates and graduate students. And you know some get inspired in unexpected ways and move things forward, that’s lovely when that happens.”

I suspect he has a particular name in mind here because Milgrom did not create Auctionomics alone, his business partner being a Stanford graduate he taught himself. I stumble over her Italian name. “Silvia Console Battilana”, he says, smiling as he corrects me. Battilana earned a Stanford PhD in economics and was an entrepreneur before joining forces with Milgrom. She has since been named a Young Global Leader of the World Economic Forum in the Davos Conference and was selected for the Silicon Valley’s Business Journal’s “40 under 40” list in 2011. And that is just a summary of a few selected achievements. It is obvious Milgrom approached the right person for the job, but when did Battilana first stand out to him?

“I was in charge of recruiting new graduate students and I wanted ideas from existing students about

how to appeal to them”, he starts. “She had some ideas, but they required a lot of work. I thought boy that’s a lot of work, but she said, ‘Oh I’ll take care of it!’. And I found out she’s someone who could come up with ideas and then execute them herself.” This work ethic extended beyond university recruitment. Whilst pursuing her PhD, she also established international development projects in India, Bulgaria, and Panama.

It was this “energy and initiative” that sparked the partnership. “I’m a full-time professor, I can’t be there supervising people so I need someone who can do things on their own. We needed a full-time person who was going to be running things, and I gave her the opportunity to buy in.”

Rather than asking for the money upfront, Milgrom gave Battilana the choice to buy in through earnings, so their partnership was conditional on the company making enough money. “I expected that it would take her a few years to earn the money to do that – she did it in three months”, he says, grinning like a proud father.

Console Battilana became the CEO of Auctionomics

“I expected that it would take her a few years to earn the money to do that – she did it in three months”

and negotiates all of the company’s contracts, multi-billion-dollar contracts. What sort of contracts will Console-Battilana be negotiating in the coming years? Milgrom says he is “hopeful [Auctionomics] will do some more of these environmental markets” which have captured his attention of late.

He explains that recent developments have allowed market solutions to approach problems that “are inherently combinatorial,” like land preservation. He juxtaposes this with how “when Marshall was writing, he was talking about market clearing where there’s a homogeneous item. One kind of good, every version of it is the same and it doesn’t matter which units you buy.”

Since economics is starting to overcome the combination problem, Auctionomics may soon be taking on environmental projects. “Pick bits of land and set them aside to preserve species and nature. The land is most valuable if it’s all together”, he says. “Those are things that were beyond the scope of markets before, but now we can do those things. I hope to be doing more of those things, and it’s idiosyncratic. They do require knowing about the particular problem. But we have a class of techniques we can apply.”

With his company working on such high-profile jobs and such large sums of money, is the trust of politicians and government agencies hard to come by?

“There’s not just one answer to that question he says slowly. “I get different kinds of welcomes in different places in the radio spectrum domain, I am well known and well respected. Here at Ofcom in the UK and at the Federal Communications Committee in the United States, they know that I’m a straight shooter, that I tell them what I really think. I try not to be arrogant about it, I try to be open to ideas that the regulators have. I have discussions with them, and they take me seriously”

“In more domains where I’m more of an outsider, there’s much more resistance. People think ‘well our industry is different, and you can’t apply those ideas here’.” Perhaps environmental markets will be tricky to crack after all, with bureaucracy being the stumbling block.

Public opinion has turned on experts in the UK and USA in recent years, does this pose a threat to his

work and that of economists more generally?

“I don’t want to turn this into a political interview”, he begins, which seems to suggest what he is about to say is political, “but we’ve had some politicians who are demagogues, who lie regularly, and don’t care about facts, and I think that’s trouble. But I don’t think that’s a special problem for economists.” Since this is not a political interview, I couldn’t possibly comment on whom he may be referring to.

Milgrom’s concern is that we could “do a lot of damage, immediate damage and long-term damage, if we don’t base our policy on facts.” One positive, of many, in the face of this assault on a fact-based approach, is that his work is a prime example of applied economics and facts being used in the real world to improve our lives. We have created a complex world which has in the past been incompatible with our economic system. Milgrom, Console Battilana, and countless others have changed this for good.

“We’re bringing together engineering and economics in a new way… and it’s really a lot of fun to be one of the first to do that!”, Dr Paul Milgrom announced. Many have followed in his footsteps and many are on the way. This is just the beginning for auction theory. And I can comment on that with considerable certainty. ▪

“I don’t want to turn this into a political interview, but we’ve had some politicians who are demagogues”

High Fashion

Yasmin Begum & Georgia Clayton tackle the big questions about the luxury goods and services industry

What makes the luxury goods and services market important in a modern economy?

Luxury goods can and will continue to be a stable market and a stable investment. Despite fluctuations in the global economy and ever-changing global style trends, luxury is here to stay. For example, whilst European fashion houses still dominate the design process for haute couture, Asian markets have been growing substantially and leading the way for fashion innovation - think Shanghai’s Virtual Fashion Week earlier this year. Fashion revenue in Asia is projected to reach US$321,012m in 2020, with a compound annual growth rate of over 10%, according to Statista research. The growth of fashion and its contribution to the global economy is undeniable, as is the growth of Asian markets - particularly China and their growing millennial middle class.

Why do we buy luxury goods and services?

Traditionally, luxury goods sold a dream. Now, although they continue to retain this status (à la Swiss watches and Birkin handbags), access to current trends and the advent of social media has undoubtedly contributed to the ‘democratisation’ of luxury items and demystifying of trends. Next, a refocusing of consumer priorities to sustainability and accountability have made the consumer more aware of the processes and manufacturing standards which were kept under wraps for decades. Because of this, luxury brands with quality processes and materials are even more appealing to the buyer. From this perspective, it’s clear that both younger and older

consumers are buying luxury goods for the same reason: quality. Furthermore, there is the concept of Veblen goods where the quantity demanded increases as price increases, as evidenced with Chanel classic handbags and Hermès Birkin handbags. The price of these handbags has increased every year (percentage change varies), sometimes even two or three times within a year. Such regular price increases are ensured by high demand and high costs due to factors like fluctuating exchange rates and raw material prices.

What were the industry’s biggest challenges before coronavirus?

It’s hard to ignore the advent of sustainable manufacturing processes and the inevitable trade-off between quality, quantity, and profit. Less obvious is the fact that big fashion powerhouses such as Zara have come under fire for supposedly ‘stealing’ designs from indie designers and artists without credit. McKinsey suggests that it will become more and more difficult for smaller brands to compete with the economies of scale and market reach of larger luxury goods businesses, especially those which have a wider target market. For couture and highend businesses, pre-coronavirus concerns centred around manufacturing and sustainable sourcing, such as the extraction of raw materials from mines to produce cosmetics or for jewellers. Now with the pandemic, the industry has faced disruption with supply and demand of their products.

Bain & Co. predict the market will contract between 22% and 25% in 2020, will we see luxury firms struggling to survive or will they be able to absorb the costs and bounce back?

Again, we return to the democratisation of luxury and luxury goods trends. On one hand, luxury firms will struggle if they do not now appeal to a wider consumer base. This doesn’t threaten their exclusivity and appeal, as there are still barriers to entry in terms of price, but it does expose them to a broader range of younger customers eager to embrace new trends. We’ve seen this in the rise of streetwear brands (e.g. Supreme) over the last 4 to 5 years. This is certainly a portion of the market for ‘traditional’ luxury couture providers to enter into. On the other hand, coronavirus has shone a rather uncomfortable light on the sourcing and manufacturing processes for many fashion and couture houses.

For instance, Kylie Jenner and Kendall Jenner’s fashion line, which falls under The Global Brand Group, has recently come under fire for delaying payments to Bangladeshi factories which make their luxury clothing. In the short-term, luxury conglomerates and smaller luxury groups may not suffer as great a hit from coronavirus as expected; but there is a greater cost in doing nothing given the number of younger consumers who are increasingly more aware - and angrier about - inequalities and injustices across all stages of the luxury production and consumption cycle. Furthermore, luxury brands such as Chanel have increased their prices during the pandemic to reflect rising costs caused by disruption to their supply chains. They may need these margins to soften the impact of the crisis and reinvent their supply chain.

China accounted for 90% of global luxury market growth in 2019, so will it be China that leads the recovery of the industry?

‘Recovery’ is a broad term. As mentioned, Shanghai recently led virtual Fashion Weeks which replaced the usual in-person events, and so the impetus for change in a seasoned industry may certainly come from China. China’s urban middle class enjoyed an increase in disposable income of almost 600% from 2008 to 2018 and McKinsey found that millennial customers account for 56% of luxury goods sales in China. It seems affluent Chinese customers will be well-poised to lead some recovery given their immense purchasing power. However, money in the bank will not heal the luxury goods industry if global supply chains are affected worldwide. Additionally, coronavirus has hit spending among China’s affluent millennials, so long-term recovery will not necessarily result from them alone. The recovery of the global economy will rely on collaboration, sustainable investment, and engaging with consumers who have less disposable income compared to pre-pandemic times. Chinese consumers have an appetite for luxury but may have to wait before their demand can be fully satisfied. Furthermore, according to Bain’s 2019 Luxury Goods Worldwide Market Study, it is Generation Z, alongside Generation Y, that will reshape and drive market growth by 2035. This will be through disruptive consumer trends and increasing Chinese demand. Consumers are still interested in buying luxury goods during a pandemic. When news broke that Chanel planned to increase their prices again in May 2020, many shoppers in Asia queued in Seoul, Beijing and Shanghai to purchase Chanel products before the increases were introduced.

Beverly Hills, USA Beijing, China

China’s prominence will continue to rise post-pandemic. Will luxury businesses struggle with rising political tensions?

It depends on how you look at it. If we consider Chinese-owned brands and fashion houses, then yes, there will certainly be doubts cast on them by Western consumers. This can be found in the increased scepticism consumers have towards the reliance on China for manufacturing and production. Moreover, the escalating US-China trade war has obvious implications for manufacturing due to increased protectionism. In the short-term, the winners may be smaller, independent, and more local luxury businesses such as independent jewellers and boutiques. In the long-term, however, this question is one to keep an eye on.

If habits stick, we should see more digital shopping post-pandemic. With luxury goods placing more emphasis on the shopping experience, will online sales be as effective for luxury firms?

Chanel has stated, frankly, that it does not intend to sell its goods online - CFO Phillipe Blondiaux made this very clear in a recent interview with the Financial Times. However, rivals Louis Vuitton and Gucci were identified by the Financial Times as increasing their e-commerce presence - no small feat, considering how fast-fashion giants ASOS, BooHoo, and Pretty Little Thing dominate online retail and entice the masses towards cheap clothing. In addition, second-hand e-commerce sales of luxury goods already account for 7% of online luxury sales revenue. High-end providers such as the Vestiaire Collective and Chrono24, the online luxury watch retailer, are already established as sustainable providers of luxe. It’s hard to ignore the lure of e-commerce, especially nowadays. As slow adopters of current technology and digitalisation in retail, it will remain challenging for luxury brands to carve out space in the online arena. Bain & Company has previously conducted a survey that reviewed shopper demographics and channels they likely to purchase through. They found that customers are increasingly shopping online for luxury products since it is convenient and easier to browse, causing many fashion houses to now cater to online orders. Online sales accounted for 12% of the market, with 75% of luxury transactions influenced by online channels, in Bain’s 2019 Luxury Goods Worldwide Market Study. However, consumers enjoy the experience of luxury retail shopping so online shopping will not be able to replace the feelings associated with in-store purchases.

General public opinion is shifting away from a glamorisation of extensive wealth due to persistent and worsening inequality, and the media exposure of crises such as those in Yemen. Will this hurt demand for luxury goods and services?

Whilst there has certainly been a newfound focus on global current events in mainstream media, the recurring themes of quality and responsible sourcing and sustainability will continue to benefit the luxury goods industry. For example, Hong Kong upcycling and sustainable fashion line, The R Collective, is committed to responsible fashion by repurposing and rebuilding textiles to create exceptional clothing. The demand will stay, but with a cost: consumers are now interested in the how and the why of their purchases. Moreover, luxury brands are now conscious that some wealthier customers do not wish to display their wealth with brand logos and labels. The industry is moving towards high-quality, yet discreet, fashion because consumers want high-end fashion without a display of wealth. Due to this trend, the luxury market is changing as they take into account perceptions, attitudes and culture. Besides, more consumers are increasingly moving away from luxury good purchases towards luxury experiences such as travel to lavish destinations and creating memories to share with others as another way to display their wealth.

How will we see luxury firms change their approach to satisfy this shift in preferences?

Transparency. Rather than vague attestations of sustainability and ethical practices, consumers want to know who made their products. We see this even for non-luxury brands such as Lush, who label their products with the name of the individual who made a certain bottle of shampoo or hand cream. From this end, luxury firms must avoid the trap of ‘greenwashing’, empty promises, and demand tangible information on how products are made. Furthermore, in recent years, some brands have ceased to use exotic materials such as animal skins and fur. Chanel announced in December 2018 that it will ban the use of exotic skins because it was getting difficult to source high-quality materials ethically as they move towards luxury cruelty-free fashion. This move made Chanel the first luxury fashion house in the world to introduce such a ban. Other brands that followed are Vivienne Westwood and Diane von Furstenberg as they shift towards alternatives such as man-made textiles, creating ethical and sustainable fashion for consumers that are now more conscious about their purchases. ▪

Business Down Under

Edward Furst looks at how the UK's post-Brexit trade deal with Australia will shape up

InMarch 2017, the then Trade Minister, Greg Hands, announced the government was targeting trade experts from Australia, and other close Commonwealth countries for secondments in the International Trade Department, as it grappled with the task of preparing senior officials and departments for upcoming trade talks. While this highlights the lack of trade expertise in Britain – a result of having outsourced this function to the EU for nearly half a century – it also reflects the enduring strength of the Anglo-Australian relationship, despite the separate paths taken by both following Britain’s initial entry into the European Economic Community in 1973. While Britain pursued an uneasy marriage with the continent, Australia reoriented its trade focus towards Asia. A post-Brexit trade deal is an opportunity for Britain and Australia to revive its trading relationship on preferential terms.

This article will look at the prospects for such a UK-AU Free Trade Agreement (FTA), including what sectors a deal is likely to cover, the potential sticking points in negotiations, and the political and economic context in which it will be negotiated.

Trade deal: political and economic context

The symbolic value of striking an early trade deal with Australia is clear. The government will be keen to demonstrate the opportunities available to a newly independent Britain, and that countries outside of Europe are lining up to sign trade deals with it. As Foreign Secretary Dominic Raab wrote in the Australian Financial Review during a trade mission to Australia in the week following Britain’s official departure from the EU – ‘Britain can now forge ahead as a self-confident, global nation, ready to reinvigorate our ties with old friends' [1]. The speed with which a deal could be agreed adds to its political value, serving as a potential ‘quick win’ for post-Brexit Britain. Both Canberra and London hope to have a deal in place by the time the UK leaves the transition period in December, or at the latest by mid-2021.

Both countries have been engaged in informal trade talks since 2016, with a Trade Working Group established shortly after the EU referendum to identify the scope and structure of a potential deal.

Both sides are aiming for deeper linkages in higher education, professional services, and regulatory cooperation, while restoring many of the immigration pathways that have been lost over successive decades of EU membership.

This has been informed by parliamentary inquiries in both countries, set up to hear submissions from trade experts, industry groups, and regulators on the outlines of a future deal. Taken together, this preliminary work will give negotiators a head start once formal talks get underway.

There is no lack of political will on either side either, with representatives from both countries taking every opportunity to talk up the prospects of a new post-Brexit partnership. Trade ministers, high commissioners, and foreign ministers in Britain and Australia have all contributed to the positive mood music surrounding upcoming talks. Australian Prime Minister Scott Morrison said in August 2019 that Australia would be ‘one of the first cabs off the rank’ to sign a trade deal with the UK after Brexit, while Boris Johnson, as Foreign Minister, claimed Australia would be ‘at, or near, the front of the queue for a new Free Trade Agreement with Britain’ [2]. Australia was singled out as one of four priority nations the UK wants to target for future trade deals in the Conservative party’s 2019 election manifesto.

Before turning to what a UK-AU FTA will cover, it is instructive to first look at the current trading relationship between the two countries – conducted on Word Trade Organisation rules given the EU has no trade agreement with Australia. The following data is for 2018. Combined two-way trade was worth £16.1bn, with leading UK goods exports including cars, medicine, and alcohol, while imports include gold, lead, alcohol, and pearls and gems [3]. Service exports and imports are dominated by travel and financial services in both directions. While total trade with Australia is relatively small (Australia ranks as the UK’s twentieth largest trading partner by combined two-way trade),

its trade surplus of £6.3 billion is its fourth-largest, behind only the US, Ireland, and Switzerland [4]. Meanwhile, the UK is Australia’s largest trade partner in Europe and eighth-largest trade partner overall by combined two-way trade [5].

More important, however, is the two countries’ investment relationship. In 2018 the UK was the second-largest foreign investor in Australia, behind the US, with a

total stock of foreign investment worth £295.8 billion [6]. The UK was also the second-largest destination of Australian foreign investment, with total stock worth £209.9 billion [7]. This investment reflects the strong business presence in each other’s countries, with over 500 Australian businesses operating the UK and over 1200 British businesses operating in Australia [8].

Content of a deal: From agriculture to labour mobility

What can be expected from a UK-AU FTA? In short, a deal is expected to go some way towards boosting trade in goods, particularly Australian agricultural exports, but it is in the areas of services, investment, and labour mobility that expectations for growth are high. Australia hopes to export more lamb, beef, and sugar while the UK is seeking

greater market access for financial services. Both sides are aiming for deeper linkages in higher education, professional services, and regulatory cooperation, while restoring many of the immigration pathways that have been lost over successive decades of EU membership.

Goods

British negotiators will be looking to secure greater market

access for its automotive industry. Australia is already the third-largest non-EU export destination for British made cars, and out of the top ten destinations for British cars, it is one of only three with which the UK does not have preferential market access. [9]. The main aims of an FTA would be to remove non-tariff barriers to the automotive trade, such as ‘conformity assessments and technical requirements, entry formalities, rules of origin and taxes’, according to the latest Society of Motor Manufacturers and Traders Trade Report [10]. Additionally, luxury taxes can impact British premium brands disproportionately, and Australia currently levies a 33% luxury tax on many British car imports, which the UK will be keen to scrap.

The UK also sees its exports of high-end food and drink products as another area for export growth with Australia. An international ‘food and drink action plan’ was established by the government in 2016, which lists Australia as a ‘priority’ market for food and drink exports post-Brexit, and ‘offers a great opportunity for UK products…with specific opportunities in traditional British ambient grocery products, health, well-being and free-from and alcoholic drinks’ [11]. The UK will also aim to facilitate higher exports in pharmaceuticals and various manufactured goods via an FTA, however existing trade barriers in these industries are relatively low compared to the automobile and agricultural sectors, which will form the substance of any deal.

Meanwhile, the Australian government will be placing agricultural exports front and centre of any new trade deal. Noticeably absent from the existing trade relationship outlined above are agricultural goods, once Australia’s primary export to the UK.

As pointed out by Alan Oxley, managing director of trade consultancy ITS Global, Australia’s loss of UK market access for agricultural exports after its entry into the EU in 1973 is a ‘long-standing gripe’of the Australian government, despite Australia’s subsequent economic success from trading with Asia [12].

In 1973 Australia exported 102,800 tonnes of beef to the UK, which had fallen to just over 4000 tonnes in 2019. Similarly, exports of Australian lamb and wheat have fallen seventy percent and ninety-nine percent respectively since 1973 [13]. The EU’s Common Agricultural Policy erected a barrier for Australian agricultural exports and ended most of Britain’s preferential trading relationships with Commonwealth partners.

While the EU has reduced tariffs across most sectors in recent decades, they remain high on agricultural goods – on average 8.5 per cent [14].

The Australian parliamentary inquiry into AU-UK trade stated ‘Brexit provides an unprecedented opportunity for the Australian red meat industry to enhance its trading relationship with the UK’, and to re-establish Britain as a key export market for Australian meat [15].

Brexit also provides an opportunity for Australia to renew historical sugar exports to Britain. Under the Common Agricultural Policy, beet sugar production (dominant in Europe) is favoured over raw cane sugar (common in Australia) meaning sugar exports to the UK came to an end in 1973. The Australian Sugar Industry

Alliance believes that, as with meat exports, Brexit presents a ‘significant opportunity’ to restore ‘trade arrangements supplying raw sugar to the UK’ [16].

Investment

Already the strongest pillar of UK-AU relations, facilitating investment growth is high on both countries’ agendas. Former International Trade Secretary, Liam Fox, pointed to the great untapped potential for the UK’s tech industry, arguing any FTA should promote further investment links in this sector, pointing to BT’s recent investment in a cybersecurity research centre in Sydney as a prime example of such activity [17].

The character of UK-AU investment may also change somewhat post-Brexit. Britain has historically been used by Australian firms as a launching pad into Europe, however, a looser arrangement between the UK and the EU may undermine this function. Meanwhile, Australia is keen to promote itself to UK firms as a launching pad into Asia, where access to China’s still expanding middle classes and newly developing Indian markets are highly attractive. A 2017 joint UK-AU investment report outlines these objectives and recommends their inclusion in any future FTA [18].

Financial Services

Financial services are the priority when it comes to service linkages between the two countries. The former Lord Mayor of the City of London, Alderman Charles Bowman, highlighted the 2018 UK-AU ‘fintech bridge’ as a blueprint for a future FTA. The agreement promotes close collaboration between the Australian and British fintech sectors, allowing for the exchange of talent and capital and the trialling of initiatives in each other’s markets [19]. Other proposals put forward by The Australian British Chamber of Commerce include negotiating ‘passporting’ rights for financial firms to operate in each other’s country, as well as reaching formal arrangements for using London’s financial markets and services to help manage the $3.4trn (£1.75trn) invested in Australia’s superannuation industry [20].

Higher Education

Former Australian High Commissioner, Alexander Downer, talked up the prospects for greater post-Brexit collaboration in higher education in 2018, proposing ‘more formal arrangements or joint research projects, better exchange arrangements for academics, more opportunities for British students to spend time studying in Australia and Australian

Exporting more sugar and red meat to the UK is a priority for Australia.

students studying here in the UK’ [21]. These objectives were echoed by the peak bodies Universities UK (UUK) and Universities Australia (UA) following a bilateral meeting in March 2018, with a commitment to ‘turbocharge’ collaboration between the two following Brexit [22]. Collaboration between newer institutions in each country is seen as a particularly promising area for growth, with the aim of creating more partnerships like the one between the University of Wollongong and the University of Surrey, which facilitates joint research funding and projects between the two institutions [23].

Immigration

Both countries have pointed to the freer movement of people as a key win to be gained from a UK-AU trade deal. International Trade Secretary, Liz Truss, said in September 2019 that visa-free travel with Australia would be on

the table as part of the free-trade negotiations, while Australia has made it clear that it will demand greater visa access to post-Brexit Britain during negotiations – but stopped short of endorsing the completely free movement of the kind it currently enjoys with New Zealand [24]. The Prime Minister himself, Boris Johnson, has long advocated for free movement between Australia and the UK, proposing a free movement zone be created in 2013 [25].

Australian immigration to the UK has declined in recent decades. A victim of the government’s lower net immigration targets, it has suffered along with other non-EU nations from heavy-handed measures designed to compensate for the growing levels of EU immigration under freedom of movement rules. Migration between the UK and Australia peaked in 2001 when 30,000 Aussies moved to the UK annually with 52,000 Brits moving the other way. In

the same period, immigration from the EU to the UK grew from 49,300 to 221,800 [26]. Surveys have shown clear support among the British public for increased migration from non-EU countries such as Australia, Canada, and the US in exchange for securing trade deals, and a UK-AU FTA will seek to deliver on closer people-to-people links [27].

The mutual recognition of qualifications is another measure both sides hope to negotiate to make it easier for labour to move between countries. The EU’s 2005 Professional Qualifications Directive put an end to many favourable arrangements the UK had with Commonwealth countries, including Australia, for the mutual recognition of professional qualifications. For example, since 2005 Australian trained doctors, architects, pharmacists, and veterinary surgeons have not had their qualifications recognised in the UK, requiring additional, sometimes

British Prime Minister Boris Johnson (left) and his Australian counterpart Scott Morrison (right) are both eagern for a post-Brexit trade deal.

Ben Shread / Cabinet Office / (http://www. nationalarchives.gov.uk/doc/

Kristy Robinson / Commonwealth of Australia / CC BY (https://creativecommons. org/licenses/by/4.0)

burdensome, examinations to qualify. For doctors, it can take up to a year to requalify in the UK [28]. The mutual recognition of qualifications along with a liberalised visa system is a shared objective for both countries going into negotiations, and a likely win-win outcome from any trade deal.

Negotiations: sticking points and strategies

On the whole, there are more reasons to believe negotiations will proceed smoothly than otherwise, especially when compared to the trickier task of negotiation deals with the EU and the US. Shared regulatory, political, and legal systems between the two countries make the task of opening up each other’s markets far simpler, with high levels of pre-existing compatibility. Additionally, Australia is an open, free-trading economy that has enjoyed decades of growth based on developing strong trading partnerships. Combined with the political goodwill outlined earlier, the prospects of each side reaching an agreement appear promising.

But, as with any trade deal, there are still difficulties. Most significantly is the issue of agriculture and Australian demands for greater market access for its farmers. There are a number of concerns on the UK side in this regard. Firstly, Australian food standards differ from those in the EU, specifically on hormone-treated beef, which Australia uses to grow cattle quicker but the EU claims is carcinogenic. Dropping this ban will be a primary demand on Australia’s part, but the recent public backlash over the possibility of chlorinated chicken being included in a UKUS trade deal highlights the lack of domestic appetite for reducing food standards. Further, the farming industry in Wales fears the UK market will be flooded with cheap Australian lamb, undercutting

local producers. Pressure from British farmers keen to protect their markets will weigh on UK government considerations. A 2017 report by the Brussels based think tank Friends of Europe highlighted the impact of importing meat and dairy products from countries such as Australia would have on UK agriculture, pre-empting the difficult choices the UK will be faced with post-Brexit [29].

Australia insists these problems are not insurmountable. It rejects the EU’s assessment that hormone-treated beef is carcinogenic, while the High Commissioner, George Brandis, claims that fears of flooding the UK market with Australian imports are overplayed. ‘Nothing could be further from the truth’, Brandis said in August 2018. ‘In fact, Australia can’t even supply the hungry middle-classes of Asia fast enough, with our agricultural products’, and therefore the UK would only ever be a secondary market for Aussie farmers [30]. Some sort of partial agreement on market access for Australian farmers should be possible, but whether such a compromise favours Australian or British interests more remains to be seen.

Tough negotiating strategies on Australia’s part may also throw up difficulties. Australia has honed its trade negotiating strategies after decades of experience negotiating trade deals with much larger partners (notably the US and China). The Welsh First Minister Carwyn Jones, representing Welsh farming interests, expressed this concern, saying ‘Australia holds all the aces. Trade deals take years … if you do it in a short period of time the people who know what they are doing are going to have the advantage’ [31]

One strategy Australia may adopt is to exploit the fact it is in no rush to sign trade deals, unlike

the UK, and wait until the UK has reached agreements with larger trading partners like Canada or the US and then piggyback off concessions granted in those deals. This is the approach the University of Sydney’s Associate Professor and trade expert Mark Melatos believes Australia should take, taking advantage of the UK’s ‘distressed negotiator’ status as it leaves the EU and faces political imperatives to secure early trade deal wins [32].

Conclusion

On balance, however, both sides are confident a deal can be reached. The mutual political goodwill should help overcome obstacles in the area of agriculture, while deals on greater visa access, mutual recognition of qualifications, and investment agreements should all be easy wins and present low hanging fruit for negotiators. If this is indeed the case and a deal is secured, then in the near future consumers can expect to see more British cars on Australian roads and more Australian beef and lamb on British supermarket shelves. The financial services and higher education sectors in both countries will have closer ties, while it will be easier to live and work and move between the two countries. The net economic impact will be uncertain, with much resting on the final state of UKEU relations. Ultimately, however, the relative size of the Australian economy and total value of UK-AU trade means the economic impact is not going be substantial either way, especially compared to the outcomes of trade talks with the EU and the US. However, a UK-AU FTA will deliver on closer ties between the two countries as Britain steps into its post-Brexit future and Australia revives its oldest trading relationship. ▪

Quarantine Conversations

Conversations

The editor speaks to Jason Reed and Andrew Chang during the lockdown.

Alternative Activism

A quaratine conversation with Jason Reed about the British Conservation Alliance, Extinction Rebellion, and nuclear energy

Jason Reed is a busy man. When he isn’t studying Sociology at the London School of Economics and Political Science, he’s simultaneously a political analyst, freelance journalist, editor, and eco-activist. Okay, that last one won’t be found on his LinkedIn, but as Digital Marketing Director of the British Conservation Alliance (BCA), a student-led environmentalist group, I think it is an apt description of what he gets up to.

Jason gives an overview of why the BCA was conceived. “It’s very new, it came into existence last year. Basically, it exists to fill a gap in the market for ideas, because it seems that for a long time the environmentalist movement has been dominated by [those on] the left [who propose] socialist policies.”

What are they arguing for instead? “We want to promote sensible market-based solutions that don’t require bringing the economy crumbling down in order to save the environment. It could be described as a think tank or just a campaign organisation. But yeah that’s what we’re pushing for, a market-based approach to environmentalism.”

You would be forgiven for assuming the BCA is a conservative student organisation. Of the six experts sitting on the board of advisors, one is Tory MP Amber Rudd, two list conservatism as an area of key expertise, and a further two name the market as theirs. The blue colour scheme and Union Flag emblem bear a striking resemblance to the motifs used by the United Kingdom’s Conservative Party. In fact, I think the BCA would have used the Union Flag tree logo if it had not already been pinched by the Tories. But there is a lot more to this organisation than politics.

“The BCA is not a party-political thing”, Jason says proudly. “We have Tories, Lib Dems, Labour supporters on board, lots of independents too.” Indeed, the founding group of the BCA was non-partisan, united by their wish to see the market used more in environmentalism and not by their political party.

I ask whether left-wing supporters are hard to come by given the BCA’s conservative associates. “We’ve

never had any problems with engaging with people because people on the left that we work with reach out to us rather than us reaching out to them. So the people we are in contact with are already sympathetic to what we are saying. We will publish articles from both sides of an argument and there is room for debate – that is why it works as a non-partisan organisation. It operates as a ‘broad church’ and there’s an effective market of ideas within it.”

The emergence and growing popularity of environmental movements that transcend mainstream politics is no surprise given our political classes have sleepwalked into the unfolding climate crisis. Extinction Rebellion (XR) is probably the most notable of these groups. Founded in the UK in 2018, this decentralised grassroots movement has three primary demands:

“Government must tell the truth by declaring a climate and ecological emergency, working with other institutions to communicate the urgency for change.”

“Government must act now to halt biodiversity loss and reduce greenhouse gas emissions

to net-zero by 2025.”

“Government must create and be led by the decisions of a Citizen’s Assembly on a climate and ecological justice.”

A Citizen’s Assembly is a small group which is randomly selected in a similar fashion to jury service. In support of their point, XR cites the success of the Irish Citizen’s Assembly in encouraging the implementation of climate policies. In 2019, in order to receive recommendations on how to achieve net-zero emissions by 2050, the UK government put plans in place for Climate Assembly UK. This group has now concluded its meetings and its full report will be released in September this year. This is a start from XR’s perspective, but of course, the implementation of these recommendations will be at the government’s discretion.

Citizens’ Assemblies the world over have seen their recommendations either ignored or quashed in a national referendum. Referenda on each climate decision would be practically impossible and it is uncontroversial to say that the government will be reluctant to implement certain climate policies due to the political clout of lobbyists.

If XR get their wish and the Assembly’s recommendations are made binding, then the lobbyists and interest groups will simply retrain their focus on the “independent” non-governmental organisations and “professional facilitators” that XR say will run the Assembly. One suspects that would simply trigger

the migration of the political farce from one place to another. This is merely a thought experiment of course because the government will not give up control over such a crucial policy topic.

Jason is not a fan of XR. He points to the members “who are campaigning for eco-socialism, and sometimes eco-fascism” as his rationale. As a grassroots movement, there is going to be a range of political

stances within XR which will at times contradict the central message. The third demand is about the methodology of environmentalism and so is bound to drive disagreement.

The other two demands, however are focused on awareness and a net-zero carbon emissions outcome – not controversial to your average environmentalist. Going forward, Jason is optimistic about gas emissions. “We’re definitely heading in the right direction, I think it’s 67 or 68 days in the UK we’ve gone without any coal-powered electricity, which is obviously a huge step forward. It has never been done before. And if you were to believe the likes of Greta Thunberg and the kind of rhetoric that Extinction Rebellion chants out, it would seem we are digging a big hole for ourselves. That we can’t escape, that we keep using more and more fossil fuels, that isn’t necessarily true.”

“That is why it works as a non-partisan organisation. It operates as a ‘broad church’ and there’s an effective market of ideas within it”

The fact he places himself at odds with Ms Thunberg surprises me. After all, as Digital Marketing Director of the BCA, they basically have the same job description. He too is an activist who is trying to wake the world up before it is too late to prevent irreversible damage to our environment.

That said, many people have indeed misinterpreted Thunberg’s call for civil disobedience as a call for disrupting the daily lives of normal people. Stopping people from getting home after an exhausting day is only going to alienate people from environmentalism.

The UK has been a world leader in transitioning away from fossil fuels, but this does not invalidate Thunberg’s point that global emissions are dangerously rising. Climate change does not care about which country you come from. A global problem requires a coordinated solution. Every country requires the means to reduce emissions without harming their standard of living. Jason outlines how this could be tackled.

“Oil and gas continue to be a problem. A carbon tax is one of the solutions put forward by the BCA and by many others. There are other things, I’m sure you’ve seen already, like Clean Asset Bonds.” This is good on a national level, but how can this be scaled up to an international response?

“A taxation system incentivises innovation in the green energy sector.” Then, by “exporting the technology”, there can be a global response. This market-based approach requires consumers to support energy companies that focus on renewable electricity generation and requires such generation to be profitable. This is achievable through the government subsidising the high start-up costs faced in renewable energy production and through activism changing people’s preferences for the better. Jason, Greta, XR and the BCA are on the same side here. If this little plan were to be put into action, everybody would win.

I ask Jason for his thoughts on the significant involvement of the government in such a course of action. “[There is a] need for a distinction between

market-based solutions and a kind of ultra-libertarian anarcho-capitalist view, which the BCA is not [advocating for]. There are certain issues where there will be externalities, such as carbon emissions, where there is a need for the state to lay down boundaries and to incentivise the use of more environmentally friendly products.” This highlights a very important point. A ‘market-based approach’ does not mean the market is left unbridled to run riot. The state can draw the boundaries and allow the market mechanism to operate within the newly defined field of play.

On the topic of electricity generation, I ask about nuclear energy since it releases an unbelievable amount of energy with zero carbon emission. Indeed, a 2013 study by P. A. Kharecha and J. E. Hansen estimated that saved 1.84 million lives have been saved by nuclear energy since the 1970s due to the prevention of air pollution.

Jason is very keen. “We should be embracing it! It is such a brilliant form of energy production that answers all of our problems all at once! It is as if it has been designed by someone saying, if we could have a perfect energy source, what would it be like? And that is pretty much what nuclear energy is. It’s bonkers that we’re not already making better use of it.”

The BCA is very strongly in favour of expanding the UK’s nuclear energy output for its safety and cleanliness. A 2016 study shows that deaths per terawatt-hour of energy production from nuclear energy is lower than that for fossil fuels and many forms of renewable energy production.

Nuclear energy still faces stiff resistance due to high costs and the unique issue of its toxic waste. Greenpeace labels nuclear power as “incredibly expensive, hazardous, and slow to build.” Indeed, a 2019 Lazard study found the levelized cost of nuclear energy exceeded that of geothermal, solar, and both offshore and onshore wind energy generation; levelized cost is a measure that takes into account fixed and variable costs, so different generation methods can be credibly compared. A redeeming feature of

nuclear energy is that its plants have a much higher power output, so the demand for electricity is much more easily satisfied.

I ask how nuclear energy production will grow if this opposition remains. “It is difficult to avoid nuclear energy because you cannot choose where your electricity comes from”, he begins. “You only really run into an issue when you want to build whole new plants, which we’ve seen obviously in the UK many times. And the answer to that is more education. The stigma that exists around nuclear energy is an ill-informed one. It is a very understandable one, but it is one that doesn’t really have any basis in reality.”

But Jason doesn’t think this opposition will prevent a transition from fossil fuels to nuclear, for the simple reason that “more people care about reducing carbon emissions and moving away from fossil fuels than they do about avoiding nuclear energy.”

I ask whether he thinks there should be international cooperation when it comes to building our nuclear power stations. There has been recent controversy surrounding the UK government’s decision to allow the Chinese National Nuclear Corporation to take a stake in the Hinkley Point C nuclear power station due to security concerns.

“Er… this is a difficult one”, he says slowly, as he prepares a brief verbal answer to a question that would take a book to thoroughly explore. “Obviously this is something that is being reassessed in the light of the current crisis. Before the crisis, it looked like Huawei was going to be running the 5G networks, and now it looks like that is not going to happen. So when it comes to China specifically, this is a very, very, delicate foreign policy issue. To be honest, I don’t feel qualified enough to talk about this, I don’t know. When it comes to other countries that are not China, that we have good relations with, I don’t see any problem at all with working in tandem. We believe in reducing barriers and if that means cooperating more with other people around the world… for mutual benefit, I think that’s great.”

A fierce debate will surround nuclear energy for many years to come that will divide environmentalists from across the political spectrum. Jason and the BCA will be at loggerheads with Greenpeace over nuclear energy but disagreements like this cannot be allowed to suppress environmental activism, because we simply do not have the time.

Interestingly, XR takes no official stance on nuclear energy, or indeed any particular solution to the crisis – although they do advocate for the Citizens’ Assembly to determine this. In their own words, XR is

“best built as a ‘broad church’ and that respectful discussion should take place within the movement on a variety of topics.”

Sounds familiar, doesn’t it? If the BCA and XR are both ‘broad churches’, they really ought not to be at each other’s throats. I’m sure Jason would question the effectiveness of the “market of ideas” in XR circles, but we must recognise that there is more that unites the environmentalist movement than divides it. ▪

The British Conservation Alliance has recently published a book titled 'Green Market Revolution'. This aims to be the first ever international manifesto for market-based environmentalism. It can be downloaded for free at: https://www.greenmarketrevolution.eco/

“[There is a] need for a distinction between market-based solutions and a kind of ultra-libertarian anarcho-capitalist view”

Open-Mindedness

A quarantine conversation with Andrew Chang about curriculum reform and economic pluralism

Ivery clearly remember my first impression of Andrew. We were sat next to a discussion about macroeconomic schools of thought, the sort of lunchtime debate that naturally erupts between interns at an economics think tank. Hoping to find someone to back them up, one of the arguers turned to us and asked, “classical or Keynesian?”

“I’m a pluralist”, Andrew said, lounging in his chair and smiling, clearly pleased with himself.

In the context of economics, pluralism is the belief that teaching and research could benefit from the inclusion of many economic theories, both mainstream and heterodox alike.

I ask whether he still feels the same as he did a year ago. “I think so”, he says smiling slightly. “I was part of the Durham Society for Economic Pluralism and I looked at reforming the curriculum a fair bit, but it is hard work getting that work heard. With my position now as the VP of the Durham Economics Society, I hope to develop an effective dialogue between students and the faculty about bettering economics teaching.”

There is a seven-hour gap between us when we talk on Zoom. It must almost be midnight for Andrew in Taiwan.

I ask about the motivation behind the campaign. “The idea is…”, he starts but falters. The lateness of the hour must have him feeling very tired.

He gets his train of thought going again. “We don’t want people to think about progress in economics in the same way as in hard sciences where everything is an improvement on what came before, and only one way of thinking is correct. It’s not a linear progression, it’s more like a tree where each branch is a school of thought that can give insight.”

The movement for pluralism in economics is nothing new. People have campaigned for teaching and

“We don’t want people to think about progress in economics in the same way as in hard sciences”

research to include more schools of thought since the mid-twentieth century. Whilst it is often thought of as a fringe movement, pluralism is not universally controversial, and professional economists and students are sometimes on the same page.

In 2012, Paul Krugman and Richard Layard wrote the Manifesto for Economic Sense, which sets out what these economists believe was wrong with fiscal policy and responses to the financial crisis. Krugman was frustrated by other’s inability to apply past lessons to the financial crisis and was horrified by how “fears of higher interest rates weigh more highly with policy-makers than the horrors of mass unemployment.” This Manifesto is a pluralist document as it aims to make economists, both academics and policymakers, consider different approaches.

Andrew cites learning from the financial crisis, and crises before it, as key focal points for pluralists. “Often there’s a focus on learning from past economic crises and making sure models reflect practical reality instead of mere academic flair.”

In recent years, the movement has seen more organisation from students. Many universities have a pluralism society and there are national and international organisations that aim to coordinate their activities. Take the Rethinking Economics group, which includes the Durham Society for Economic Pluralism, for example. They co-ordinate student groups in fifteen countries in an attempt to reform curriculums and educate people on different approaches.

What is the focus of the curriculum reform campaign in Durham? “We’d like to see more critical thinking assessed in exams so not all questions are stepping through a model by following a standard

procedure. And I think more open-ended questions to improve economic literacy.”

Concrete recommendations were given but Andrew is frustrated by some people’s willingness to embrace change.

“The structure of an economics degree is too stubborn”, he starts, his hands resting on his cocked head. “It seems institutions don’t want to change the development path of their economists. They risk damaging their reputation if they have an adventurous curriculum”. His words reflect the annoyance of seeing years of work ignored. After all, Andrew has spent two years looking at curriculum improvement.

That said, Andrew is keen to stress that pluralism does not mean all schools of thought are equally valid and applicable. “I am not advocating for equality of recognition for different approaches. Some theories may be wrong or irrelevant to the issue you’re looking at.” It is a very important concern.

Not all economic theories are created equal. A curriculum based on the philosophy of “theory equality” would give you economics graduates with no appreciation of how to correctly apply what they have learned.

As the incoming Vice President of the Economics Society, Andrew is hoping to keep the debate about the curriculum alive. Economics degrees are full of Keynesian and classical economics but, as I learned last year, that isn’t going to satisfy him.

Andrews yawns – it’s getting late in Taiwan. With that, he heads to bed. ▪

“They risk damaging their reputation if they have an adventurous curriculum”

Discontent from Forgotten Regions

Keyi Yu on why the 2016 Brexit referendum result should have surprised nobody

Social

justice lawyer Bryan Stephenson once said, ‘We shall judge the society not by how they treat the rich, but how they treat the poor.’ With mature fiscal policy mechanisms such as welfare spending set in place, do you take pride in the UK being fair and equitable?

In the UK, poorer regions in the North receive £1,247 per capita in planned spending, whilst in London that number is a staggering £3,636 according to the HM Treasury’s 2019 report. Yet council taxes, a significant source of local government income, follow the opposite regional pattern. The most expensive bills are to be found in less affluent regions including northeast England, where families are paying up to £1,000 more than they would in the capital.

In Hartlepool for instance, where the average wage is £23,962, Band D homes pay £1,685 in council tax a year, which is £1,000 more than a similarly sized

sized home in Westminster and £600 more than in Kensington and Chelsea. Every city that ranks in the top 10 most deprived in the UK, according to the Multiple Index of Deprivation 2019, is in northern England or Wales. Therefore, some places "do not seem to matter to the governmen", according to Andres Rodriguez-Pose, regional economist at the London School of Economics. The UK is regionally unequal. Yet unlike international inequalities (analysed by Nobel laureate Joseph Stiglitz) or internal wealth inequalities (articulated by Thomas Piketty in 2014), most neo-classical economic textbooks are not too concerned with regional disparities.

In this article, I wish to provide you with a lens through which you can understand the outcome of the 2016 Referendum. I shall explore why the electorate voted for populists from a regional economic perspective, the urgent need for innovative placebased policies, and how to embed regional thinking next time you think about the UK economy.

A 2019 academic study conducted by Maria Abreu and Ozge Oner of Cambridge University found that people living in areas with lower wage growth were 1.8% more likely to vote leave. Since the private sector has become increasingly London-centric, it is not picking up the slack in regions that are ignored by the public sector. Therefore, slower regional wage growth will in part be due to the absence of government attention. It can be argued that the study suggests where there is little or no government expenditure to stimulate the local economies, people are inclined to vote Leave.

This study is particularly credible because it matches observation groups. This allows the study to control for self-selection effects of people into particular constituencies. Holding all else constant, high unemployment, inequality, and welfare claims are considerable factors in the 2016 Referendum result.

Economic agents in regions with low governmental spending and high direct taxes observed their social surroundings and voted for the choice they believed could improve their conditions, thus explaining why provincial England voted for populism. This is called the environmental observation mechanism. Discontent about their current situation, people wanted to voice their unhappiness. Under the influence of political campaigns and behavioural, cultural and contextual effects, English people from ‘forgotten regions’ eventually resorted to the ballot box to voice their anger at being left behind and at Westminster investing too little in their regions. There was hope that, by leaving the EU, life would change for the better with more UK autonomy and no membership fees to be paid to the European Commission.

Consequently, a straight-forward policy recommendation is not to engage in austerity. In places that are pro-redistribution, people were 3% less likely to vote for Leave as indicated in Table 2. Strengthening regional governments would direct funding from the affluent London and South East England to regions in provincial England and Wales, and will significantly reduce the feeling that politicians think ‘they are places that don’t matter’.

I assert there is a strong negative correlation between regional investment and inclination to vote populism. A strong case study to support this view is that Manchester voted strongly for Remain (60.4%) whilst Yorkshire (57.7%) and North East Lincolnshire (69.9%) voted for Leave (Statistics from the House of Commons Library, 2017). The former has seen major regeneration projects, whilst the latter are places that have received very low regional investment.Let us proceed by examining Manchester’s regional investment and explore the positive economic and political impacts.

Place-based policies improve skill levels, attract innovative firms, and increase local income growth. Furthermore, regional investments can change the outlook of neighbourhoods, removing the cultural rational to vote for authoritarian populist leaders, as suggested by Pippa Norris and Ronald Inglehart in their 2019 book Cultural Backlash. If there is an improvement in wages, skills, and renovated spaces, and removal of derelict land and buildings, the environmental observation mechanism may start a positive cycle of feedback. People no longer feel the need to vote for populist parties who promise for wholesale change as they are witnessing improvements under the current government. Also, if people have secure jobs and are happy, they might no longer feel hostility towards migrants who are often labelled by political campaigns as coming to ‘claim benefits’ and ‘steal jobs’ – as the Trump campaign proclaimed in the United States.

In response, targeted regional policies can be implemented to incentiviseattract innovative firms to relocate from the South East and London to other cities, as very successfully illustrated by Manchester convincingattracting the BBC and ITV to move their headquarters from London to MediaCityUK in Salford Quays. In 2015, there were approximately 3,500 residents and 900 businesses supporting over 26,000 jobs– around 23,000 more jobs than were lost when Manchester Docks closed in 1982. Derelict ports from the industrial age have been transformed into a booming hub with innovative tradable sector firms employing locals. This creates a multiplier

People from ‘forgotten regions’ eventually resorted to the ballot box to voice their anger at being left behind.

effect in employment because the employees require service from the local non-tradable sector, such as restaurants, hairdressers and schools for their children.

Salford City Council secured £3,775,321 in funding for the MediaCityUK project from the North West Regional Development Agency (NWDA), and a further £6,852,678 under the European Regional Development Fund (ERDF) which is managed in the Northwest by the Department for Communities and Local Government. The former was one of the nine government Regional Development Agencies (RDAs) to promote regional development but was abolished in 2010 to reduce the government deficit. According to the same source, the work of the (RDAs) had a “significant impact on the economic growth and condition of England… [and created] prosperity in the regions. [It] made sure that each region was able to make the most of the opportunities which were available; and secondly, distributed the massive UK budget (over £2 billion) and European funds (£2.5 billion)’. Both of these activities supported the Regional Economic Strategies set out by local governments.

Nonetheless, there are concerns about re-distribution policies. First of all, the overall efficiency gains from agglomeration in London might be lost. Edward Glaeser’s 2011 book Triumph of the City argues that the physical proximity of innovative firms creates synergies and positive spill-over effects. Should innovative firms scatter across the UK, this might be ost. Consequently, careful national and regional planning cooperation must take place. Secondly, regional policies have in the past been unsuccessful because firms often relocate again once local funding ceases, so the local regions do not benefit from the multiplier effect in the long run. Moreover, firms

often bring their own personnel from other cities, so a limited effect will be found in the local labour market.

Therefore, it is crucial to consider addressing institutional problems which determine whether or not a ‘country’ (in this case a region) will be successful according to Acemoglu and Robinson’s book Why Nations Fail. Addressing local problems such as low skills, low productivity, high costs of living might be more effective in solving the problems from the bottom up. Policies to equip the long-term structurally unemployed with transferrable skills such as programming skills, language skills and T-level education might significantly boost employability, hence increasing local standards of living, as three popular measures of well-being, opulence, utility, and capabilities, will be improved.

In conclusion, the result of 2016 EU referendum is an alarm bell of discontent that chimed from regions that central government agencies have ignored. Regional economic and cultural factors played a fundamental role in convincing people to vote Leave in regions that have been ignored by the central government, as shown by the abolishment of Region Development Agencies in 2010. Redistributive regional policies may reduce the economic and cultural influences on dissatisfied voters outside London and the South East, as demonstrated by Manchester which has undergone major regeneration. If there is a strong multiplier effect, it will do so without compromising the government objective of reducing the budget deficit. Nonetheless, it is important to address institutional problems to avoid the short-term positive impacts fading away. Without this, regional policies cannot bring fundamental changes to the economic and social outlooks of declining regions in the UK. ▪

Student Politics

(Minus the booze and backstabbing)

Cambridge University Conservative Association (CUCA), Cambridge University Liberal Association (CULA), and Durham University Labour Club (DULC) each have their say on some politically charged economic questions.

How should economic policy be shaped by climate concerns?

CUCA

Timothy Butterfield, Social Events Officer

Since the Rio Earth Summit in 1992, the UK has delivered the deepest carbon emission cuts and achieved the best economic performance of any G7 state . A 42% cut in CO2 emissions, with 72% economic growth. Both the highest in the G7. In 2019 we became the first major economy to pass ‘net zero emissions’ laws, committing to a “legally-binding target of net zero emissions by 2050” .

Pondering the Extinction Rebellion protests last summer, I wondered how much knowledge the protestors actually had about the history and present state of decarbonisation and environmental protection in the UK. Despite the shrill rhetoric about emergencies and an apparent lack of progress, the UK has made massive strides in decarbonisation and environmental protection.

This is the result of a delicate and intricate combination of research, design development, field trials and upscaling to industrial-scale developments, which has been going for over the last 40 years. Many ‘breakthroughs’ in achieving the levels of renewable energy generating capacity that we see today are the result of unique practical circumstances which enabled large-

scale developments and cost reductions. These ‘opportunistic’ leaps could not have been made if we had had a more rigid centrally-procured, government-controlled structure. Fortunately, in 2011 the UK government chose instead to create a ‘market-driven’ approach by reforming the electricity market; setting the general market conditions for achieving the desired outcome, like tilting the playing field of a marble labyrinth. This was not a ‘free market’ in a de-regulated, profit-focused sense, but it was carefully designed to achieve decarbonisation, whilst allowing industry to find its own path to get there and where competitors could profit from finding ways to reduce costs and increase output.

Ultimately the conservative approach should be to allow the people of the country the freedom to conduct their lives and make their own decisions in life. How this plays out in terms of trying to achieve a certain macro-scale output has required this philosophy to be applied to the commercial world, allowing those within that field the freedom of choice as to how they get there. And we have seen that so far, this has been remarkably successful in meeting the required decarbonisation progress to date. ▪

“Despite the shrill rhetoric about emergencies and an apparent lack of progress, the UK has made massive strides in decarbonisation”

CULA

Freddie Poser, Chair

The climate is changing and we are causing it. That is not up for debate.

Climate change, global, manmade, and accelerating, is the gravest existential threat humanity has faced since the Cold War, perhaps ever. What is equally clear is that policy responses so far have been woefully inadequate. The extent to which we will need to reshape, reorganise and reprioritise our society is immense and most people, myself included, have not begun to grapple with it. The Liberal Democrats have been at the forefront of evidence-based climate policy for years, but now we need to be more radical and more assertive. Time is running out, but there are still opportunities to limit warming.

Governments will be the key driver in doing this, but they will need to harness the greatest tool we have for organising societies: the market. We shouldn’t leave saving the world to bureaucrats and politicians, but instead let every single economic actor do their bit. The single most important policy for making this happen is a tax on the price of carbon. Ultimately, this needs to be global, but we must not be scared of starting with the UK.

In 2019 the Lib Dems had one of the strongest positions on climate change, with crucial government intervention planned for the energy, transport and financial sectors, to name but a few. We wanted to target ‘net zero’ by 2050, to decarbonise electricity production by 2030, and invest in public transport; but unfortunately, amongst all this, no mention of a

carbon tax. We cannot rely on piecemeal government diktat; we must internalise the externality that is CO2 production.

If you talk to those on the far left, they will say we need to dismantle capitalism, that this is what will solve the climate issue. Failing that, they might point to graphs that make claims about the top 100 companies and their carbon emissions. These are just a convenient get-out for leftists in highly developed countries to avoid examining their lifestyle and impact on the environment. The beauty of the market is that production occurs when there is demand. If you want to buy fast fashion, to eat meat and to drive a car, that is going to have the same emissions regardless of the economic system. The only way to shift demand, without compromising liberty, is to make high-carbon goods more expensive.

As a society, we need to make tough choices. The climate emergency will only be solved through sustained, global action. The policies we employ need to be radical, not ideological. I do not wish to whitewash the difficulties. A carbon tax could easily become regressive if not implemented sensitively (proposals for a ‘carbon dividend’ are worth serious investigation) and it is not a wonder-drug solution –government regulation in other areas will be necessary. But the market has delivered the greatest rise in living standards in human history. We should not turn away from it now, but embrace its power for societal change. ▪

“The policies we employ need to be radical, not ideological. I do not wish to whitewash the difficulties”

DULC

Jack Ballingham, External Campaigns Officer

Perhapsthe obvious point to be made about climate concerns and economic policy is the urgency of the matter. The immediate danger posed by climate change demands that it be regarded as the most important aim of economic policy at present.

Such an assertion is not at odds with the usual socialist claim that the primary aim of economic policy should be the empowerment and advancement of the workers. Indeed, the economic solutions to climate concerns and traditional socialist aims would work hand in glove, with one driving the other. Solving the challenges of climate change requires a radical reorganisation of economic priorities, and so does prioritising workers’ rights. The radical changes needed to deal with climate concerns also offer an opportunity for a sea change in the distribution of economic power.

Dealing with climate change will require unprecedented state intervention; problems of energy generation and transport cannot be solved by the market. This offers a chance for a radical government to advance workers’ rights on its terms. The enormous expansion in green energy generation and green transport, among other things, will require the

employment of hundreds of thousands under conditions of state planning.

The “Green Industrial Revolution” name given to this process by Labour is not an understatement. Not only will this drive Britain towards solving the problems of climate change, but it will provide hundreds of thousands, perhaps millions, of new jobs, jobs which can be well paid and unionised. Green industry can be planned in such a way as to rejuvenate those areas of Britain most hurt by the decline of traditional heavy industry and mining. Many communities sprung up around these industries and had their hearts torn out by the advent of neoliberalism.

The Green Industrial Revolution that is so crucial to our survival will also bring about the return of jobs which are well paid, with state-guaranteed training, and which are, importantly, unionised jobs that safeguard workers’ rights. This Revolution not only provides the way to deal with climate concerns – it offers the most coherent challenge to the established neoliberal order. Socialists must embrace the need for climate change action as an opportunity for wide-ranging change in the economy at large. ▪

“Dealing with climate change will require unprecedented state intervention; problems of energy generation and transport cannot be solved by the market”

What should the UK's international aid primarily aim to achieve?

CUCA

Curran Snell, Chair

British aid should fundamentally be used to promote the interests of this country. With such a form of ‘soft power’, pressure and influence can be used to help make the world safe, prosperous and governed by the rule of law. Such a world is good for Britain. There is a sound moral argument to say that nations which can afford to should help the less fortunate, especially during times of natural disaster or war. It is morally the right thing to do. It also boosts the prestige of Britain and mitigates the effects that war and natural disasters can have on this country – by helping those forced from their homes by the conflicts that are ravaging parts of North Africa and the Middle East, for example, the social and economic costs of the refugee crisis can be reduced in Europe. Shelters and supplies should be given to the displaced in safe, neighbouring countries and therefore people will be discouraged from risking their lives trying to cross the Mediterranean.

Currently, however, UK international aid often does not bolster British interests abroad and nor does it effectively deal with the consequences of natural disaster or war in countries which cannot afford to deal with such problems themselves. This is due to bureaucratic incompetence and the fact that the government, through the Department for International Development (DfID) (around 70% of the aid budget) and other relevant organisations, is compelled to spend 0.7 % of GNI each year. War and natural disasters cannot always be predicted, yet each year the government has a legal duty to spend a fixed amount of money in proportion to GNI. This has led to money being wasted as DfID is under pressure to fulfil its spending obligations which often results in headline-grabbing embarrassments when British taxes are used to fund the Ethiopian spice girls or similar projects which do not help the neediest.

This squandering rightly deserves the opprobrium it receives because such use of the British taxpayer’s money is neither good for Britain nor a justifiable priority in a world in which genuine suffering abounds. Having an international aid policy in which the interests of Britain are prioritised, and which has flexible spending targets, would avoid such waste. Money can be reserved for when unexpected disasters strike and funds can be used sensibly and cost-effectively to fund projects that are genuinely helpful to developing countries. This is often best done not through top-down funding, in which money slowly filters its way from one corrupt bureaucracy to another until, in a much-reduced state, it finally reaches the people who are most in need. Instead, grassroots projects carried out by respected charities, and not by failing regimes, should be supported. This will help people in need and shape the world to be one that all Britons can be proud to live in, and that their contributions through taxes helped to create. ▪

“Grassroots projects carried out by respected charities, and not by failing regimes, should be supported”

CULA

Tom McIver

In the Tory manifesto for the 2015 election, the party pledged to keep the Department for International Development (DFID) independent within Whitehall. Yet just five years on, Prime Minister Johnson has announced plans to combine it with the Foreign Office. This abrupt change in policy might be mistakenly attributed to the whims of a government with an 80 seat majority. However, the newly announced strategy for the Foreign Office and the DFID is not so surprising when the political vogues of the Conservative party regarding international aid are considered.

In particular, the government’s positions that ‘distinctions between diplomacy and overseas development are artificial and outdated’, and that international aid should ‘serve our national interest,’ are strikingly in line with the aid strategy outlined by both the Cameron and May governments. In this sense, Boris Johnson’s new aid strategy, rather than being a departure from orthodox thinking, is simply a reflection of the broader shift in opinion of what the UK’s international role should be within the Conservative party. What is different about the current government, however, is the ideological composition of the cabinet and the mandate which the Prime Minister was elected upon.

Of specific relevance is the bare appeal made to English nationalism by the Tories in the 2019 election, which is reflective of the ambition of some within the party to put national interests ahead of the liberal principles of internationalism and mutual prosperity. This has marked ramifications for use of our aid, as the political decisions the current government make about our various international relationships will be defining for the next generation.

With this in mind, then, what are the choices before the UK regarding our international role, and what should our international aid aim for? From the liberal perspective, what can be said is that the principles of Boris Johnson’s ‘Global Britain’ should largely to be welcomed. The aims of aligning Britain’s national interests with our aid and maintaining our commitment to the the Sustainable Development Goals (SDGs) are not necessarily in conflict. Pursuing shared economic policies such as improving free trade in developing regions and investing in frontier economies—for example, through initiatives to improve education, healthcare and women’s rights— can lead to more sustainable development, as stated in the Independent Commission for Aid Impact’s (ICAI) 2019 review.

This being said, although Johnson’s international aims are liberal in theory, we cannot assume that they will also be so in practice. For example, the recent move to combine DFID and FCO is at odds with the same ICAI report, and multiple former Prime Ministers and ministers of DFID have criticised the policy. Of particular concern is that the move will disempower aid workers on the ground, leading to less impactful programs and fuel for right-wing opponents of aid. These cannot be allowed to manifest, and our international aid must continue to hold the SDGs, not narrow national self-interest, as the primary aim. Only in this way can we fulfil our national moral imperative to building a more equal and fair world. ▪

“Our international aid must continue to hold the Sustainable Development Goals, not narrow national self-interest”

DULC

Jack Ballingham, External Campaigns Officer

The present pattern of international aid is one that is fraught with continuing injustices. International aid is often described by those on the right as one of two things; either as a key part in Britain’s role in the world, a symbol of its so-called “soft power”, or as a drag on the British budget, handouts to those in the Global South who don’t deserve our help. Both, unsurprisingly, are wrong, at least in their appraisal of what international aid should be.

The first, however, is perhaps an accurate representation of the state of affairs which does exist. The second representation falls quite flat when one considers what Britain, and the West generally, gets in return for its aid; it is far from a “gift” to the poorer nations. Aid from the West has, for most of its existence, been “conditional”. International aid is

not simply the provision of funds or help to poorer countries, it consists largely of loans which come with strings attached. This practice is carried out by many western actors, probably the most well-documented of them being the World Bank and the International Monetary Fund. Such conditions usually include relaxing economic regulations, introducing the power of the free market, opening up one’s economy to predatory trade practices, and demanding cuts to the provision of public services.

Such a relationship is probably best described as “neo-colonial”. The Global South might not be coloured red on the globe any more, but the economic power of Western actors is still exercised indiscriminately for financial gain over those nations. Britain is no exception to this pattern. European Union international aid also comes with similarly demanding conditions. Quite simply, international aid as it stands is largely a strategy to perpetuate the power of Western capital. It does not empower or improve the living standards of the people living in the recipient states. It would be quite hard to argue it does, considering it usually requires slashes in public expenditure.

A British strategy of international aid, then, should seek to break this cycle. Simply stopping all international aid and withdrawing from this sphere entirely would, from a socialist perspective, abdicate Britain’s duties to internationalism. Instead, international aid should take the form of empowering those in the Global South. These states should be treated as equals and partners, not condescended to or lorded over. International aid might seek to provide these people with tools for their empowerment. Investment in infrastructure and public services, without strangling conditions attached, would be a great step away from the present relationship. It should aim to help states in the Global South lift their citizens out of poverty, not to extort economic concessions from them. International aid, above all, should seek to break the exploitative and fundamentally unequal economic relationship between North and South, which is a continuing legacy of imperialism and colonialism. ▪

“International aid, above all, should seek to break the exploitative and fundamentally unequal economic relationship between North and South, which is a continuing legacy of imperialism and colonialism”

Should the UK's borders be more open or more closed?

CUCA

Isaac Lamb, Speakers Officer-Elect

There are two different senses in which a country’s borders might be ‘open’ or ‘closed’. In one sense, a country with open borders is a country which has a large intake, numerically speaking, of migrants. Closing the UK’s borders would mean reducing net immigration to the UK. In another sense, a country could be said to have open borders in that it does not ‘vet’ or ‘test’ potential migrants; a country has closed borders, then, not because net immigration is low, but because potential immigrants are met with a long list of requirements they must meet before they earn citizenship.

In terms of the UK’s numerical intake, there are several considerations for a Conservative. On the one hand, the economic strength of the UK is of great concern to Conservatives. Studies suggest that immigration aids the growth of an economy; gaps in the labour market are filled, and talent from overseas is injected into our institutions and businesses. On the other hand, Conservatives also value what they call ‘social’ capital. This is the value assigned to our institutions, culture, and in a more broad sense, ‘way of doing things’. Our practise of electing representatives to parliament, and accepting the results regardless of whether they go our way, is an example of something that does not directly produce economic capital. For the Conservative, however, this custom produces something valuable nonetheless. From this, it follows that if immigration is shown to be occurring in high enough numbers that there is a loss of social capital then the Conservative would see

this as a reason to close the border.

The Conservative line on whether more vetting is needed is clear. Conservatives are naturally disposed to see the vetting of potential migrants as positive. It aligns with some key Conservative ideas. A pointsbased system rewards merit. It also supports the conservative understanding of rights and citizenship; citizenship is not universal but denied unfairly to people born overseas. It is something that was earned, fought for, and died for, by the British and passed on to their descendants. It is therefore no injustice that potential citizens be asked to meet some criteria before being awarded citizenship. Finally, Conservatives see it as right and proper that the government’s concerns are local. The settlement Britons inherit is one where our government presides over a territory and everyone within it. It is only right, then, that this government concerns itself primarily with the concerns of those over whom it presides, and vets those that are to enter to ensure they do not wish to damage native interests.

In conclusion, Conservatives do believe that moderately open borders can be positive. The economy grows, and as long as immigration isn’t excessive, the social capital of the UK is not damaged. At the same time, this is only the case if those that do immigrate share our values and respect our traditions. As such, Conservatives are naturally drawn to a system of moderate, points-based immigration.

“As such, Conservatives are naturally drawn to a system of moderate, points-based immigration”

CULA

Keir Bradwell, Secretary

For years, we liberals have decried our opponents on the left and right for their hopelessly facile solutions to deeply complex problems. Witness Labour deciding higher education could be solved by “just making it free”; the Conservatives claiming to have fixed the 2008 financial crisis by “simply spending less money”. A liberal rarely has a policy position that does not take several mystifying graphs and a 20,000-word thesis to explain.

On immigration, however, an issue that touches upon the lives of billions and the economies of all in incomprehensibly variegated fashion, the solution, by radical contrast, genuinely is very simple.

Open the borders. Completely.

A basic premise of contemporary liberalism is that every human life is of equal worth. The responsibilities of the modern industrialised nation-state, whose wealth confers it enormous power to improve the lives of its inhabitants, therefore extend far beyond its own citizenry. Thankfully, comfortably the most effective thing such a state can do in this regard is also the easiest: allow anyone who wants to live here to do so.

Migrants move to the UK, not for the miserable weather, but because they stand to earn multiples of their current income. Some of that income can be sent back home to provide for friends or relatives; the rest used for establishing a new life in a country with a state-of-the-art healthcare system, decent schools, and good University Liberal Associations. Whether by quotas, expense, or bureaucracy, every would-be migrant prevented from living in the UK is

a person forcibly kept in relative poverty.

This is the moral argument for opening Britain’s borders. If we mean what we say when we deem every human life of equal value, we reject the idea that those born in the UK are somehow especially deserving of the advantages of living in the UK. Every migrant prevented from entering Britain is thus also victim to our failure to properly uphold our liberalism.

Many moral causes are not necessarily practicable. Abolishing material inequality is a lofty, noble ambition, but if it undermined humanity’s basis for economic growth it would trap us all on unacceptably low incomes, forever. Thankfully, immigration is nothing like this. The best part of the argument for open borders is that it works.

Explaining this imaginatively is difficult. In so few words here it is impossible to pay adequate tribute to the vast cultural endowment handed to Britain by those who have chosen to make it their home. Vast quantities of empirical literature show low-skilled migrants do not lower domestic wage rates, much more convincingly than this short piece ever could. Other arguments are relatively well established: the Economist estimates a borderless world would be $78 trillion richer, migrants are net contributors to the government’s coffers, and the notion of a ‘brain drain’ has been thoroughly critiqued.

But from all that work emerges a fundamental message. Britain freeing itself of its self-imposed restrictions on immigration is not just morally necessary. It is also common sense.

“Open the borders. Completely”

DULC

Freddy Fossey-Warren , Bailey College Liaison Officer

To put it bluntly, open borders are good. Not only should more open borders be supported on humanist grounds, but there are many, often overlooked, economic advantages too. Many of the disadvantages it is claimed that open borders would bring are indicative of wider, global issues that should be directly addressed, rather than merely swept under the rug through a policy of closed borders. The moral argument for open borders is obvious. Many migrants are vulnerable people who are motivated to migrate far more by economic and political push factors than they are by pull factors. These are the people that closed borders harm the most. When many of these push factors exist due to both the historical and recent actions of the UK abroad, it seems clear that a more open border policy is the ‘right’ thing to do.

While this may be true, the criticism of this line of thinking is obvious. Just because something is morally correct doesn’t mean it is pragmatic or feasible, and it is on this basis that most arguments against an open border are given. The idea of immigrants being an economic drain is not new, but in fact, an open border would help the UK economy far more than it would hurt it. Closed borders fundamentally act as a barrier to trade by restricting the movement of goods and labour across national boundaries. Further to this point, maintaining a strong border requires large amounts of public money. For the financial year 2016, the average annual cost for maintaining an active border force was said, by the exchequer, to be over £550 million. On top of this annual cost, between 2009-2015, over £830 million was spent on modernising border security.

An open UK border would not only incentivize trade but allow a lot of money to be redirected from border security into the economy and local communities. Some economists have even gone as far as to

estimate the economic benefits of global free movement as leading to a global GDP increase of between 67-147%.

One of the critiques of an open border coming from the left is that open migration contributes to issues of brain drain in the Global South and benefits the countries to which people migrate at the expense of the countries of origin. Migrant workers are also more readily exploited by businesses leading to the undercutting of domestic wages and a race to the bottom that harms all workers. To the extent that these concerns are true, they are not arguments against open borders, but rather arguments for an open border policy to not exist in a vacuum. An open border policy can only be at its most effective when it is merely one aspect of a larger policy of combatting neo-colonialism, underdevelopment in the Global South, and reinforcing workers’ rights globally. Preventing brain drain should be approached by combatting anti-labour trade organisations such as the IMF and the EU that hinder development and funnel capital from poorer nations to richer ones. On top of this, an open border policy would, in many ways, aid workers rights movements. A migrant worker not living in fear of arrest and deportation would be far more empowered to combat exploitation within their workplace, using their traditions of labour activism to the benefit of both them and their fellow workers.

Ultimately, while an open borders policy should not exist in a vacuum, the UK should move towards having more open borders. Looking beyond the oft-repeated, yet still incredibly important moral arguments, an open border policy would not only be economically advantageous. It would also see more effective labour activism and could easily exist alongside action to reduce the effects of brain drain.▪

“Not only should open borders be supported on humanist grounds, but there are many, often overlooked, economic advantages too”

Are the economic ideas of Karl Marx important today?

CUCA

William Rowland, Communications Officer

Nocollection of writings is more important than those of Karl Marx. An erudite economist and pertinacious theorist, a man who became stateless to martyr his radical cause, the assiduous German’s name can still be heard muttered across Britain today. Except, muttered by who? By carping students (especially the London-based lot) finding trivial contentions in points of tinpot value. Marxism has been labelled an ‘irrelevant [economic] dead-end’ by leading economists, such as Robert M. Solow. Today, Marxist historians represent a small minority of modern economists who have ‘virtually no impact’ on the output of most major economic centres and studies. Here George Stigler’s 1988 analysis of Marxian principles is agreeable, but not complete for, as stated, the theories of this great controversialist still hold minor value in economic circles. As someone who is neither in possession of rudimentary nor first-class knowledge of the intricacies of the field in question, it is testament to the inane and communistic principles that inspired some of the worst leaders the world has ever seen that even I can find such faults.

The fundamental issue is that of choice. In every circumstance where Marxist strands have inspired attempts at economic management, the liberty of the majority has been not just curbed but actively suppressed. From China to Cuba, the collectivist utopia forwarded by those unfortunate enough to have been beguiled by Marxism is unattainable under a system of socialistic sharing of wealth that simply ceases to exist once set in motion. But that’s communism, not Marxism, right? And the latter hasn’t been tested properly? Well the major ‘communist’ nations of days-of-old didn’t make up those values themselves did they – it was all foundationally Marxist and thus was Marxist in all in efforts that made people poorer. The rule of the thirty is only revived, not squandered by Marxism – so much ‘for the many, not the few’…

So why is Marxist economics still relevant today? Because it is the shadow that we must see to know there is light. We do not find perfection in capitalism, but in Marxism, we find a contrast so alarming and so ludicrous that we can live comfortably with the imperfections of the present. ▪

“The assiduous German’s name can still be heard muttered across Britain today. Except, muttered by who?”

CULA

Peter McLaughlin, Communications Officer

IfTeen Vogue is a good indicator of the state of popular discourse (and of course it is), Marx is back. As the liberal capitalist order is facing its biggest crisis since 1945, people are returning to its most famous critic. This is deeply unfortunate. Despite Marx’s fame and influence, his understanding of economy and society is stuck in the 19th century and can be no help for those of us looking to understand (or change) the world in the 21st.

Marx is often invoked by those who oppose the static nature of mainstream economics (with its focus on equilibrium) and who want to develop a dynamic political economy. And indeed, Marx was concerned with capitalist development. But he saw this development as driven by class struggle; and in the 19th century, that meant the struggle between the ascendant bourgeoisie and the exploited proletariat. Marx foresaw a proletarian revolution that would overthrow bourgeois hegemony and lead toward a classless society.

As it happened, however, the bourgeois era died not with a bang, but a whimper, through economic and political developments. For example, the rise of homeownership in the 20th century West created a middle class of capital-owning workers who straddled Marx’s definitions of bourgeois and proletarian, and who came to dominate economic life after WW2. The impact of such developments means that the class structure of today’s capitalism is incredibly different from the 19th century bourgeois-proletariat struggle. Because of this, Marx’s ideas cannot account for class and class struggle in today’s world: he had no way of theorising capitalist society after bourgeois dominance because he thought the fall of the bourgeoisie would be the death of capitalism.

Further, Marx’s belief that we should understand economic evolution in terms of class struggle is problematic even independent of his account of that struggle; for his political economy fails to properly account for politics. Indeed, Marx was not an ‘economic determinist’, but he aimed to explain political developments (like everything else) in terms of class struggle nonetheless. But although such a strategy could at least partially make sense of 19th-century politics, the central events of the 20th—the World Wars, the fortunes of decolonisation, the rise and fall of fascism, the struggles of feminism, even the life of the Soviet Union—escape it: any adequate account of these will have to refer to interests, institutions, and processes that go beyond class struggle. And if Marx’s ideas cannot make sense of these

central political events, they cannot help us understand their impact on the economic order.

As Foucault wrote, “Marxism exists in nineteenth-century thought like a fish in water; that is, it is unable to breathe anywhere else.” Marx wrote in an era of class relations that history has altered irrevocably, and with an understanding of politics that the intervening time has shown to be deeply false. Those who are looking to make sense of the current crisis, or to go beyond the limitations of contemporary economic thought, should look elsewhere.

“If Teen Vogue is a good indicator of the state of popular discourse (and of course it is), Marx is back”

DULC

Spencer Payne , Former Co-Chair

Despite the historical influence of Karl Marx never being understated, there are lots of popular misunderstandings of who he was and what he said. Some people have very out-there perceptions of Marx, like one contestant on The Chase who thought he succeeded Lenin as the leader of Soviet Russia. Less out-there, though, is the view that Marx was a philosopher of communism.

This is not the case. Marx never wrote any blueprint for a system of governance or economic management. The closest thing he wrote to this is The Communist Manifesto, a small pamphlet outlining general principles and aims he believed that radical

left should hold.

No, rather than being the author of a handbook to running a utopian state, Karl Marx was a philosopher who wrote, above all, on capitalism. Marx’s works were written to provide a compelling framework to understand the world under capitalism.

In Capital, he describes how market competition drives capitalists to strive for maximum output with minimum input – a striving which sounds sensible and beneficial enough until it is understood that curtailing of input means curtailing of wages, working conditions, and leisure time. Marx demonstrates this in the famous ‘Working Day’ chapter of Capital, detailing the history of the British Factory Acts, and the struggle of workers to reduce the hours of their working day down to ten. Factory owners bitterly fought to keep the hours of work unregulated to keep their products competitive in the export market.

This may seem to be the distant past, but the fight over the working day is not over. Rather than take the legislative route, outsourcing has become the preferred method to minimize the input. H&M, for example, moved its manufacture from Sweden to countries like Bangladesh, Cambodia, and Myanmar, where working days are longer, laws against child labour are more relaxed, and the minimum wage is non-existent. Nineteenth-century struggles over the working day and the serial outsourcing of industries of the present day may on the surface appear to be very different phenomena, but a Marxist perspective stresses that the end which the capitalists seek in each case is the same.

The strength of Marxism is the way in which it reveals patterns and continuities throughout economic history and society. Detailing all of these patterns and continuities is beyond the scope of this piece, but I hope I have explained the appeal of Marxism as a method of interpreting the world; Marx outlines rules which appear to have held true for centuries. Marx would have certainly approved of critical engagement with the rules he outlines, as he was always thorough in his intellectual ventures, but to do so requires reading his works. Those who have not read Marx but have conceptions about what he said, perhaps derived from a mainstream newspaper article or from a meme claiming he killed a bajillion people, should consider giving him a read. They may be surprised by what they find. ▪

“Those who have not read Marx but have conceptions about what he said should consider giving him a read. They may be surprised by what they find”

Chemnitz, Germany

CUCA

Tohin Munshi, Treasurer

Protectionism has, until recently, been an intellectual taboo within the prism of macroeconomic thought. To be a “protectionist” is seen as evidence of some kind of caveman-esque mentality, limited to angry and slightly xenophobic quinquagenarian factory workers. The term itself elicits memories of the most extreme examples of trade restriction in modern history, usually confined to specific periods of economic turbulence, such as the 1930s. However, such an unkind interpretation an expansive umbrella term for numerous policy tools overlooks the reality that ‘protection’ may be required to defend important strategic areas of an economy. Sometimes, national interests must override the will of the market or respond to foul-play practised by other countries which distort those market forces to attain unjust competitive advantages.

Take, for instance, steel. Though libertarians and liberals alike would have you believe that non-directly affected opponents (i.e. circles beyond unions and workers) of British steel’s decline are just obsessed with nostalgic conceptions of national virility, steel is undeniably crucial for defence and infrastructure. In the unlikely, but possible, event that we end up in another major conventional war, international steel markets will become disrupted and unreliable—therefore, permitting the degradation of our present domestic steel base is irresponsible from a national security perspective. Furthermore, while it might be cheaper to buy China’s oversupply, you don’t want faulty bridges which collapse under pressure because of low-quality raw materials. Similarly, while the concept of food security may be taken for granted, retaining a healthy agricultural base is

necessary to safeguard against unforeseeable supply shocks from abroad.

We must also confront the reality that creative destruction is not always creative—it is just destruction. The deindustrialisation of former manufacturing regions, be it in the North East of England or the city of Detroit, has been socioeconomically catastrophic. The theory tells us more efficient business models will step in and provide good jobs but the realities in these areas are that of a broader inescapable poverty cycle with prolific drug abuse, poor educational attainment and the sort of generational unemployment which gives rise to TV shows like Benefits Street. Yes, the global shifts in labour prices made the diminution of old-school mass manufacturing inevitable, but the pace of change could have been partially managed through traditionally regarded protectionist measures such as state-aid to stave off manufacturing’s decline and facilitate its updating for a commercially viable future, rather than just letting it die completely.

Many will be surprised that as a supposed conservative, I reject conventional free-market dogma on this issue of trade. This is because that dogma is not at its heart conservative at all, it is liberal. Indeed, sitting back and letting vital skills bases become redundant whilst entire regions of your country end up resembling the Iron Curtain is hardly “conserving”. We must apply common sense and pursue a more patriotic line of political economy which benefits the entire country and rebalances British economic power. ▪

Is there an overwhelming argument for or against protectionism, or is the reality of the situation a lot more ambiguous?

CULA

Daniel Jordan Davidson

This society takes the view that traditional tariff protection, overall, is bad for societal welfare; but given the growing prevalence of non-tariff measures, the welfare effects of neo-protectionism are a lot more ambiguous.

The opening up of markets across the globe in the last century has been characterised by a reduction in tariffs, pushing non-tariff measures (NTMs) to the forefront of modern trade negotiations. NTMs can be welfare enhancing even if they restrict trade, as they are used to address types of policy objectives such as environmental impact, public health and consumer safety. The conflicting objectives provide an opportunity for firms to affect NTM adoption through lobbying, which drives the potential for distortion of these measures for protection at the firm or industry level.

In recent years, quantity and price controls, and other NTMs, have increased in number. The proliferation of sanitary and phytosanitary measures and technical barriers to trade are less explored but comprise up to 90% of NTMs. The ability to comply with complex regulatory regimes drives trade flows and market access.

Technical and complex policy decisions obscure the policymaking process, with the lack of transparency or oversight from voters hiding protectionism. NTMs should be a more efficient form of protectionism for both businesses and politicians since lobbying contributions must compensate the government for deadweight loss. Democracy impacts the policymaking process, causing lower tariffs and higher

NTM adoption to protect markets under the guise of liberalisation. This result follows from the Sturm’s 2006 political agency model.

A 2019 study by the Economic and Social Commission for Asia and Pacific Studies into the trade effects of ‘legitimate’ NTMs finds over half of those implemented in Asia & Pacific region directly address UN Social Development Goals. These measures raise the cost of imports in the region by 15%, showing the trade effects of even the most innocently implemented NTM. This creates economically significant windfalls in trade policies reducing them.

The takeaway from all of this is that whether a measure is ‘protectionist’ matters less than the trade-off between the main welfare benefit of the measure and the welfare loss of the protection. Inclusive incentive structures should be developed, such as the EU Commission’s approach of incorporating industry forums and experts into policymaking processes, thus meaning firms must take a long-term approach to protection lobbying. NTMs will continue to dominate trade issues as policymakers enjoy the extension of sovereignty they offer into other markets and the political objectives they address. Increasingly comprehensive trade agreements will seek to break down barriers to intellectual property, bilateral or multilateral investment and procurement (all NTMs). This society believes, given the high weighting of social welfare in a policymaker’s decision function, highlighted by Goldberg & Maggi in 1998, non-tariff measures are something to encourage if they do not impede an individual’s liberty. ▪

“Many will be surprised that as a supposed conservative, I reject conventional free-market dogma on this issue of trade”

“Traditional tariff protection, overall, is bad for societal welfare; but the welfare effects of neo-protectionism are a lot more ambiguous”

DULC

Sean Hannigan

Protectionism

attempts to shield domestic producers from foreign competitors, usually through import taxes or outright bans to impede international trade. ‘Free trade’, implicit of anti-protectionism, was promoted most notably by US hegemony during the Bretton Woods era, seen as optimal for nations to prosper. Later on, however, the notion of ‘managed trade’ was later touted when Asia’s industrialisation began and American manufacturing jobs themselves emigrated. The question of ‘overwhelming argument’ in favour or opposition to protectionism depends on who you ask. Since you’re asking me, I advocate that there is not an overwhelming argument in favour of protectionism primarily because of the additional costs it creates for all actors.

Implementing tariffs in a capitalist economy, for example during the 1930s, hurts consumers. Particularly if the good is normal and with use-values cutting across income streams, such as food, shelter, or basic utilities. Implementing tariffs is bad for both consumers and producers for neither can exchange for what the other wants as payment –there is a distortion. I don’t think that many socialist economists, myself included, would argue with this. International trade is good for those who can exchange but only if all parties consent to this model of trade, trade is not ‘imposed from above,’ and trade does not subject parties to neo-colonialism, whereby many people’s livelihoods, for example in the developing world, are dependent on the whims of the developed world to survive. When international trade manifests as neo-colonialism, it becomes clear as to why protectionism may become wanting.

As the industrial jobs in many parts of the North of England and mid-West of the United States discovered, the rise of Asia largely exported manufacturing jobs to the Far East, leaving many once-prosperous working-class areas deprived. If my job was transported to another country, taking my community with it, I would certainly consider the possibility that protectionism would serve my interests. If we were to close our nation’s economy, perhaps my job could have been protected.

If my job was transported to another country, taking

my community with it, I would certainly consider the possibility that protectionism would serve my interests. If we were to close our nation’s economy, perhaps my job could have been protected. However, comparative advantage suggests international trade is better for those who can now buy cheaper products and for those in other countries whose new jobs pay more than before, of course at the expense of domestic communities who themselves lose out. Continuing with expensive production when it could be done for less reduces purchasing power, particularly concerning for those on lower incomes. What is needed, then, is not protectionism but, rather, intervention.

As the Labour Party’s 2019 manifesto outlined, to reverse the decline in communities destroyed by the Thatcher governments and not properly rebuilt under the Blair years, heavy intervention along the lines of a Green New Deal is needed. This would provide the education, social services, and other supportive institutions necessary to breathe new life into – and not gentrify – these areas, as those already living locally could take advantage of new opportunities encouraged by the state. Kick-starting a Green Economy could thus see jobs return to those who have so badly lost out, and remove the attraction of protectionism.

Protectionism is understandably attractive, particularly if you have lost out from neoliberal globalisation since the 1970s, but it will hurt other actors through the knock-on effects: reduced purchasing power for consumers when buying at higher prices vis-à-vis an open economy, and workers in other nations who would benefit from higher-paying jobs. Further, however, is the question of increasing wealth divides in a global economy serving the interests of capital, who can move their businesses around the world and take advantage of ‘free trade’ (often neo-colonialism in a different guise), whereas labour cannot. Protectionism is an understandable reaction to an economic system determined largely by the uncertain motivations of investors seeking profit. But a Green New Deal could return livelihoods and prospects to those who lose out under (neoliberal) globalisation, particularly in the UK.

“There is not an overwhelming argument in favour of protectionism primarily because of the additional costs it creates for all actors”

Does the UK's green belt policy need reform in light of the mounting housing crisis?

supply by simply building more houses. More homes for sale, for rent, privately owned and for social housing. Yet it is not enough for these homes to simply be built; they must be in areas where people want to live.

For too long the green belt has disrupted these objectives. A physical cap on development, it has kept expansion on the edge of our growing towns and cities low and as a result house prices have been driven up. And for what? For too long many UK citizens (and Conservatives, sadly) have been committed to the green belt as a bastion of our nation’s green and pleasant land, providing green space to urbanites and preventing urban sprawl. Yet two fundamental realities completely undermine the green belt’s premise.

Firstly, the green belt is not actually that green. Huge swathes are derelict and unmanaged, abandoned pits and storage yards or thickets choked with rubbish. This land isn’t offering any benefits to urban residents, but it is driving up the cost of affording even a modest home. Secondly, we still accept the idea that development must be bad for the environment. Yet in the 21st century, this couldn’t be further from the truth. Clever urban design that integrates public parks, green space and water features can address pollution, the urban heat island effect, and people’s desire for nature far more efficiently.

It’s time for the government to violate the sacrosanctity of the green belt and make the right decisions for the future. Our urban areas need to grow to both support growth and people’s quality of life. Derelict ‘brown space’ green belt should be steadily opened up for development. A new generation of garden cities should be pursued that provide a quality, preferably carbon-neutral, built environment. Moreover, the government can use the green belt to tailor development in new and exciting ways. Steady liberalisation can ensure schools, hospitals and transport links are already in place to provide managed expansion that doesn’t swamp infrastructure.

An obvious failure of recent governments, including those led by the Conservatives, has been the approach to housing policy. For too long we have tried, through schemes like Help To Buy, to enable more people to afford homes at the current market rate. Yet the far more efficient and fair way to tackle home ownership is to reduce prices and expand

By reducing the green belt first in the West Midlands and Northern Powerhouse, we can provide obvious incentives for businesses to invest and locate where property is cheaper and their employees can afford a higher standard of living, drawing growth out of the South East. Perhaps most importantly, more land will mean more homes and lower prices. The tight control of land up to this point has allowed large construction companies to corner the market and inflate prices. Green belt liberalisation could lead to a revolution led by small construction firms. We need reform and we need it now. ▪

CUCA

Zachary Marsh, Campaigns Officer

“Our urban areas need to grow to both support growth and people’s quality of life”

Laurence van Someren, Treasurer

Witheight million Britons living in housing that is overcrowded, unaffordable or otherwise unsuitable, more and more adults lodging with their parents, and increasing numbers finding themselves homeless, it seems the housing crisis has in recent years become as much of a constant of politics in the UK as NHS underfunding, potholes and xenophobia. A whole host of policies will need to be rethought if we are to fix a mess of such magnitude, but few are as glaringly obvious as the green belt.

Of course, it shouldn’t take a housing crisis for us to realise the green belt policy is a dud. For one thing, the romantic idea that a patchwork of monoculture crop fields and golf courses is of any great ecological value is naïve at best. And by pushing commuters further away from the cities in which they work, green belts require people to travel for longer—usually by car—to get to their jobs, which is problematic for both their quality of life and the planet. Besides,

it is far from clear why the ‘urban sprawl’ the green belt is supposed to prevent is such a bad thing, when the evidence shows that urban living is so much more environmentally friendly than the rural alternative. Just like a political party that opposes nuclear power and a frigid island in the North Atlantic, the green belt ultimately fails to live up to its verdant name.

But the housing crisis offers another reason to ditch this disastrous policy. In a country with a housing shortfall of over a million units, it couldn’t be much clearer that we need policies that encourage construction, not restrict it. Nobody wants the South to look like Greater Tokyo, but when only 11% of England has been built on, we can afford to take a more liberal approach to urban growth, with green areas punctuating cities, rather than suffocating them. Take Cambridge as an example. With space inside the green belt drying up, house prices here have grown by 20% in the last five years. So many people have been forced to commute in from a growing web of distant villages that a whole new layer of local government, the Greater Cambridge Partnership, has been created to provide the necessary transport links. Other cities face a similar story.

It would be foolish, though, to see reforming the green belt as a silver bullet. A holistic, liberal strategy would also involve greater incentives for developers to build housing where it is needed most—in inner-city neighbourhoods within existing green belts. For example, a land value tax would efficiently and fairly encourage higher density building in cities and push prices down. On the other hand, we must resist populist calls for rent controls and affordable housing requirements, which will be more of a hindrance than a help in tackling this crisis. ▪

“It would be foolish, though, to see reforming the green belt as a silver bullet”

DULC

Sam Kwiatkowski

The UK housing crisis is without a doubt one of the biggest challenges our generation faces. Research in 2019 estimated that 8.4 million people living in England were affected by the housing crisis. This notably includes 2.5 million who are unable to afford their rent or mortgage, and a further 2.5 million who cannot afford to move out of unsatisfactory living arrangements, such as those living with their parents or ex-partners. It is incontestable that this is an issue that needs to be addressed; but is the alteration of Green Belt policy a rational way to approach this?

The crux of this issue appears to be the dichotomy between preservation of the environment and development. The Green Belt was introduced with the primary aim of preventing urban sprawl, and in this regard has been undeniably successful. Green Belts have also been shown to reduce both air and noise pollution significantly, and in a world where air quality is being rapidly degraded, air quality is something that we should strive to maintain. However, the Green Belt is not without its issues or criticisms. The problem of the reduction of developable land is a common criticism of the Green Belt, which is one reason why house prices are so inflated in the UK. Additionally, whilst Green Belts are praised for their environmental positives, an unfortunate consequence is that local public land is lost, thereby greatly reducing the air quality for and health of those who reside in inner-city areas.

I think it is therefore not unfair to say that the Green Belt policy may need rethinking. However, the removal of Green Belt securities must not be a sacrificial lamb; meaning that we cannot remove protections for this land without ensuring that developments are conducted in a way which would combat the housing crisis. In 2017, 425,000 new homes were planned for sites protected from urban sprawl, but crucially 70% of these developments were not classed as affordable. Furthermore, last

Autumn, it came to light that a 2015 Conservative flagship pledge to build 200,000 new starter homes had fallen short of the mark – by 200,000. Simply put, the Conservatives have a proven track record of failing to address the housing crisis adequately by not building houses for those who the housing crisis most affects, and have a proven track record of failing to develop Green Belt sites sustainably.

If Green Belt policy is relaxed, it must be done in such a way which benefits those who are affected by the housing crisis: the young, the old, and those who live in areas short of jobs. From the poor management by the Conservatives of both the housing crisis and protected land, it seems evident that the Labour Party is best equipped to change Green Belt policy whilst ensuring that developments are sustainable. Sir Keir Starmer’s continued commitment to ending the housing crisis provides a great deal of hope to those who are most affected by it. ▪

“If Green Belt policy is relaxed, it must be done in such a way which benefits those who are affected by the housing crisis: the old, and those who live in areas short of jobs”

Essay Competitions 2019

Whilst it is certainly more convenient to view the world as binary with only right or wrong answers, the reality of the matter is much more complicated. Hence, it would be a sweeping statement to say that either an authoritarian or democratic government is better.

Instead, this essay will argue that an authoritarian government is better at delivering economic growth only in the early stages of development, while democratization is desirable as the economy matures. Autocracy can be more focused on economic growth as it is more efficient at making decisions, even those that might be resisted by the public. As economic development consists of more than just economic growth, a democracy can better deliver on the other measures such as welfare and equality. Thus, while authoritarianism can promote faster growth, democracy allows the economy to develop more comprehensively and inclusively.

Autocracy is better at delivering economic growth

Authoritarianism is more efficient at boosting economic growth in the early stages of development mainly because the regime can adopt good-quality policies and implement them efficiently, which is particularly necessary for the developing countries.

Xinyi Qu

An autocracy is broadly defined as a regime where the majority of power is held in the hands of a few (Khan, Batool and Shah, 2016), which insulates it from various private and social pressures and allow the best policies to be pursed (Przeworski and Limongi, 1993). Apart from being less sensitive to societal pressures, the implementation of policies is also less interrupted by changes in power and the presence of opposing parties.

In contrast, a democracy might be less efficient in decision-making as the power of democratic rulers is checked by other parties (Rivera-Batiz, 2002), which allows powerful special interest groups to sway the decisions made in parliament. Interest groups lobby to maximise their net benefits (Becker, 1983), which is wasteful and inefficient due to their rent-seeking behaviour. Diversification of power in a democracy wastes time during decision-making (Dahl 1971), which hinders economically beneficial projects from being implemented as soon as possible, limiting the economic growth of the country.

The construction of high-speed rails (HSR) in the UK (democratic) and China (authoritarian) could be used as a case in point. The UK’s 750km High Speed 2 (HS2) project was proposed in 2009 but the decisions on the

route were approved by the Parliament only in July 2017. Phase 1 and Phase 2 of HS2 are estimated to finish in 2033 yet there are still on-going debates and national campaigns against the project. In contrast, China began to build its high-speed rail in 1998 and by the end of 2018, China's highspeed rail has reached 29,000 km in total length, becoming the world's longest high-speed railway network. The HSR in China has an estimated return of 8%, well above the opportunity cost of capital in China and most infrastructure investments in other countries (World Bank, 2019).

The ease of transport has increased business opportunities (Hyatt, 2018), promoted regional economic growth (Li, 2019), and increased productivity overall (Lawrence, Bullock and Liu, 2019). This is especially critical for low-income countries as they require predictable, strong, and centralized institutions during their ‘catch-up’ phase that democracy cannot supply (Haplerin, 2005). Hence, in an authoritarian state, economic growth will occur immediately, bolstered by the multiplier effect which further stimulates the economy. Autocracy is also more likely to mandate saving, which can be translated into investments (Huntington, 1968).

Democracy could deter long-term

Is an authoritarian government better for economic development than a democracy?

growth because economic freedom leads to immediate consumption at the expense of investment (Galenson and De Schweinitz, 1959). Societies with single-party regimes show a greater savings rate (14.5%) than states with no legislatures (9.9%) and thus a higher economic growth rate (Wright, 2008).

Even though economic growth is only one aspect of economic development, it is the foundation upon which other factors lie. Hence, developing countries need to secure this before they can proceed to target other factors of development such as education, life expectancy and equity. The efficiency and focus provided by an autocracy surpass that provided by a democracy, and thus an autocracy seems more desirable for a developing economy (Leftwich, 1995).

Maturing economies: moving towards democratization

However, there are drawbacks to adopting autocracy: unsustainable growth and a lack of economic freedom. The economic growth led by autocracy is unsustainable (Acemoglu and Robinson, 2012) because it occurs at the expense of the environment, equity and the human capital upon which growth is built. Hence, a transition to democracy is to achieve sustained economic growth.

Democracy provides a more stable political environment by preventing unconstitutional government change (Acemoglu and Robinson, 2012). This is desirable as it increases predictability in the economy, encouraging investment and spurring growth. South Korea is an example of a successful

transition, where the previous dictator decided to encourage economic freedom and democratization. If he had not done so, the country might have failed to sustain its stellar economic performance in the long term as it would be difficult for South Korea to adjust to the changes in the economic environment (Im, 2011). Therefore, once the country has achieved sustained economic growth, it needs to transition to strive for sustainable growth. This process is facilitated by democratization, which brings other benefits as well.

dictatorships in the Latin American (Lipset, 1959). Heo and Hahm (2015) support this view by establishing a positive correlation between democracy and economic performance with data from 1950 to 2000. Their result provides empirical evidence that the relationship is bidirectional, where good economic performance promotes democratic regimes, which then engenders positive feedback that further promoted economic growth.

In transition countries, economic freedom has a positive impact on economic growth largely because this property attracts more foreign and domestic investments. In contrast, political freedom does not influence economic growth (Piatek, Scarzec and Pilc, 2012). To get the best of both worlds, we can adopt an “authoritarian democracy” where the government has basic democratic characteristics but sacrifice certain human rights based on the context of the economy to bring about both rapid growth and stability (Leftwich, 1995).

According to the convergence theory, the closer an economy gets to its steady-state, the slower it will grow. Thus, growth can be fast at first but tends to slow down as the income levels converge (Helliwell, 1992). This means that when the income level has nearly caught up with the high-level income countries, the advantage of authoritarian government on rapid economic growth tends to disappear.

In this stage, the stable democracies show advantages – 7 democracies or unstable dictatorships had average incomes about 40% higher than the 13 stable

Democracy is better at leading economic development

As the economy matures and becomes a developed economy, democracy is better at achieving multi-dimensional economic development than an autocracy. A democracy provides more merit goods - public services with positive externalities – and a higher quality of social services (Lake and Baum, 2001). A greater concern for human welfare is also observed; cross-country data from 92 countries showed a positive correlation between democracy and welfare, measured by the Human Development Index (HDI).

Highly democratic countries (represented by the European and Non-European countries) had a higher HDI than more autocratic countries (represented by Asia and Sub-Saharan Africa), with HDI at 0.65 and 0.45 respectively. If a country can transition from extreme authoritarianism to perfect democracy, the HDI value will increase by 17% (Khan et al., 2015). For example, when Nigeria was controlled by military rule in 1983, the enrolment to primary schools dropped from 81% to 72% and the disease immunisation rates among children reduced by over 50%.

A critical point to note is the strong positive correlation between democracy stock – a measure of the survival and maturation of democratic states – and economic development (Heo and Hajm, 2015): the higher the degree of institutional maturity, the more effective the democracy is.

Therefore, if an authoritarian country has achieved sustained economic growth, it is worth

converting to a democracy, which may guarantee a higher level of economic development – the ultimate aim of people and government.

However, there exist other determinants that affect economic growth. For instance, if a country has very few natural resource rents (small percentage accounted for GDP), a perfect democracy will perform better than an autocratic state by about 1.5% of economic growth yearly (Collier and Hoeffler, 2004). If society is more homogeneous, authoritarianism could be more suitable. These factors highlight to us how idiosyncratic each country is and that an ‘ideal’ institution does not exist.

Conclusion

In conclusion, whilst there is no one-size-fits-all answer to what regime a country should adopt, there is still a suggested path that countries can refer to. This involves an understanding that in the early stages of economic

development, the authoritarian regime is more efficient in helping the country to catch up with the developed ones as soon as possible through implementing good-quality policies and improving investment. After a certain level of development, people’s basic needs are satisfied and they would want more rights and freedom, hence the government is required to achieve a higher level of development instead of mere economic growth. Democracy itself has value because people have the right to have freedom, such as political and economic freedom, no matter whether it can accelerate economic growth or not (Sen, 1999). In reality, many practicalities reduce its efficacy, for example, bounded rationality in people's understanding of political regimes and economic development. Therefore, what matters most is the effectiveness of policies, the stability of the regime, and the developmental stage that the economy is in. ▪

Seoul, South Korea

Can Behavioural Economics Solve the Climate Change Crisis? Archie Bowman

Henry Ford once said, “If I had asked people what they wanted, they would have said faster horses”. Perhaps in the context of climate change, the environment might have been better off with ‘faster horses’, but this provides the perfect reasoning for why behavioural economics may be able to help solve the climate crisis (Weber, 2015). Humans naturally anchor the choices that they make towards the decisions they have made in the past. Through the use of choice architecture and other behavioural techniques, individuals can be steered towards making decisions that go against the

status quo and are more beneficial to the environment. Furthermore, behavioural economics can be used not only in the form of minor isolated nudges but also as a way of enhancing existing forms of climate control policies on a global scale, such as the carbon tax.

This essay will explore the three main behavioural techniques that could be used to curb the escalation of global warming. These include the use of ‘framing’ to bridge the political divide on climate change and allow major action to be taken, choice

architecture to ensure that consumers make the most environmentally beneficial decisions with the most accurate information, and the use of social nudges to encourage firms to emit fewer greenhouse gases in their supply chains. However, there is a strong argument against the use of these softer techniques for reducing global warming, and this argument will also be evaluated.

Bridging the Political Divide

One of the most important reasons for the insufficient amount of action taken on this issue is the political stigma which is attached to implementing policies that deal with climate change. While most people would prefer a world without global warming, the shortterm costs that we must pay for such a change are what prevents many politicians from taking the drastic measures needed to solve this crisis. By using behavioural economics and framing certain policies in a more psychologically astute manner, important policies can be implemented without major political repercussions, especially concerning carbon taxes or other changes in financial costs.

Amongst more conservative voters in both the US and the UK, taxes have strong negative connotations. However, such policies as Carbon Taxes will be vital for offsetting the damage that harmful products do to the environment

(or at least signalling to consumers the damage that they do). As a result, various ‘framing’ methods have been designed to bring about the same effect as taxes, but in ways that are not as politically abrasive to some voters (Kahneman & Tversky, 1981). This will make it more likely for politicians of different ideologies to support such change, thus bringing about more impactful results.

Use of this ‘framing’ technique on a smaller scale can be found in the airline industry. In one survey in the US, two sets of people were given the choice between buying a normal airline ticket or one with an extra carbon fee of $7.70. The only difference between the two groups was that one was labelled a “carbon offset” and the other, a carbon tax. Those who took part were also required to state their political affiliation. The results showed a clear distinction between those at different ends of the political spectrum, with the behaviour of Democrats staying largely the same across the two groups, while the actions of Republicans varied significantly. The study showed that 67% of Republicans bought the ticket with the Carbon Offset, but only 27% bought the ticket with the Carbon Tax (Weber, 2015).

With the US political system rarely allowing laws to be passed that only appease one side of the political divide, coming to a mutual agreement on climate change action is one of the only ways that decisive policies can be implemented. This is a clear example of how behavioural economics and psychological framing can help bridge the divide across political parties and facilitate the urgent change that is needed to curb global warming.

Choice Architecture to Influence Consumer Decisions:

One of the cornerstones of behavioural economics is query theory. This is founded on the principle that we make decisions by arguing with ourselves and marshalling the evidence of one side against the other, often subconsciously (Weber, 2015). Concerning climate change, much of the evidence currently conveyed to us about potential choices place the environmentally beneficial decision in a less preferred position than others. This is due to the delayed and obscured benefits of choosing an option that may be more expensive but less damaging to the environment.

Choice architecture, among other behavioural techniques, can be used to make more environmentally beneficial alternatives more appealing, without changing the choices that individuals face. For example, Japan is planning to place labels on consumer goods to display carbon footprint levels, making it easier for individuals to directly differentiate between products. The plan will initially cover a select range of goods, from food and drinks to washing powder, each carrying descriptions of how much gas responsible for climate change has been released in their production (McCurry, 2008). In doing this, the complexities of these larger issues are somewhat demystified, giving consumers a clearer choice about the products that they buy. While not everyone would pay extra for the more environmentally friendly option, the very fact that people’s decisions can be informed by more accurate and representative information means that these behavioural techniques could result in more environmentally beneficial decisions being made.

In the same way that compulsory information about the risks from cigarette smoking has helped reduce the demand for such products through behavioural science, the same can be achieved with

climate change (Thaler & Sunstein, 2008).

Social Nudges to Influence Firms: The increase in transparency that such labelling initiatives can bring about serves not only the purpose of nudging consumers towards making environmentally-conscious decisions. Such mandatory requirements may also nudge businesses themselves to take steps that lower their carbon footprint.

This principle has already been applied in the US to reduce the levels of hazardous chemicals that companies possess, and the same could be applied towards cutting the amount of greenhouse gas that businesses release in their supply chains. First implemented by the US Congress in 1986 following the Chernobyl nuclear disaster, the ‘Toxic Release Inventory’ (TRI) mandates businesses to report the quantities of potentially hazardous chemicals that they have stored and then publishes the results on the Environmental Protection Agency (EPA) website for anyone to access (Hamilton, 2005). With more than 650 chemicals being listed by 23,000 firms, the results have brought about hugely beneficial behavioural change without needing to implement any new laws.

As a result of the highly accessible nature of this information, media outlets have consistently targeted the worst offenders on this database, creating an ‘environmental blacklist’ which results in bad publicity for these businesses and a decrease in share prices (Fung, Archon & O’Rourke, 2000). This is beneficial for two reasons; firstly, companies who are on the TRI are more likely to make efforts to be removed from the list; secondly, firms will take precautions to avoid being placed on the ‘blacklist’ in the first place. The same principles could very easily be applied to greenhouse gasses or carbon footprints, thus helping to

reduce the environmental damage of the worst offenders and curb their contributions to global warming. This behavioural method could be particularly effective when considering the immediate difficulties with mandating companies to emit close to zero carbon emissions. With this initiative, firms will be encouraged to do so on their own accord, due to the likely financial implications that would arise out of the ‘naming-and-shaming’ of the worst offenders.

The Need for Further Action:

While there is clear economic theory and reasoning that suggests such behavioural techniques could have some success in controlling the climate crisis, the complete answer to such a problem may lie beyond minor nudges and carefully crafted choice architecture.

The UN economist, Professor Jeffrey Sachs, has suggested that such behavioural techniques - or even to a large extent carbon taxes - will do very little to deliver the major and urgent changes that need to be brought about to ‘solve the climate crisis’. In his address to the Cambridge Union in June of this year, I witnessed Sachs argue that to prevent global warming from destroying the planet, there must be an almost immediate and global ban on the use of carbon fuels and environmentally damaging products (Sachs, 2019). Sachs has cited the ‘carbon budget’ estimates laid out in the 2016 Paris Agreement on climate change as a justification for this stance. According to these estimates, and Sachs (2018) himself, in order to keep temperatures from rising two degrees above pre-industrial levels and to prevent irreversible damage to the global climate, the world must be carbon-free in the next 15 years. From this perspective, while behavioural techniques

may be able to nudge consumers into purchasing the least environmentally damaging goods, it could be argued that the change that is needed to curtail the climate crisis will need to be more forceful than the small nudges proposed here.

In essence, economists such as Sachs argue that the crisis can only be solved by changing the way people act, as opposed to changing the way people think in the hope that this will change their actions.

Tigers and Mousetraps:

For behavioural economics to bring about the necessary changes needed to curb climate change, minor ‘inward-directed’ nudges focused on individual nations will not be adequate (Sankowski, 2018). Instead - using the more globalised principles of Sachs - such behavioural techniques should be implemented globally One or two countries using query theory or choice architecture to influence the way that people

make decisions is unlikely to stop climate change. But if a global position was taken by all countries, whereby every nation-state was mandated to implement these nudges, then such techniques could well have a positive impact on reducing the growth of global warming. While using behavioural economics to solve the climate crisis may appear to be like trying to catch a tiger with a mousetrap, these nudges and techniques will almost certainly prove useful if used on a global scale (Thaler & Sunstein, 2008). However, the likelihood that all nations across the world will be able to effectively implement such specific and varied behavioural techniques is impossible to assess. The economic theory suggests that these methods would help to slow down the climate crisis to an extent, but whether or not they can be both effectively implemented on the world stage and also provide enough impact to ‘solve’ the climate crisis, is the question which is answerable only through action. ▪

Sixth Form Runner Up

Historically, the US economy has undergone three structural transformations. The industrial revolution replaced agriculture with manufacturing. Mass production then followed, allowing services to grow. More recently, the digital revolution has aided manufacturing productivity but impacted more on services (Figure 1). The coming age of robotics, artificial intelligence, and automation (RAIA) will reinforce these trends. Some even envisage a scenario where AI will pass a ‘technological singularity’ (Kurzweil 2005), triggering a chain reaction of self-improvement and explosive growth to enter the “Robonomics” era where AI-enhanced machines depose humans

as a productive factor (Ivanov 2017).

Each stage of past development caused hardship on the individual level, but employment in growth sectors absorbed those displaced and living standards improved overall. Some people think it is different this time. They believe insufficient jobs will materialise to replace RAIA-induced losses, so unemployment will grow, stoking social unrest.

Even Nobel Laureates can be unduly pessimistic regarding future unemployment trends. Leontief (1983) compared the prospects of humans to horses, saying “over the next 30-40 years many people

will be displaced, creating massive problems of unemployment and dislocation… in the last century, there was an analogous problem with horses. They became unnecessary with the advent of tractors, automobiles, and trucks… so what happened to horses will happen to people unless the government can redistribute the fruits of the new technology.”

This essay contends such a view is overly-pessimistic. Long-run gains from new technology are unpredictable and invariably underestimated, so enough jobs should surface for those determined to work. But these may not match the skills of job-seekers, nor suit their income aspirations if the job openings are predominantly low-skill/low-pay. Growing inequality also seems highly probable, perhaps posing the greatest future challenge.

Labour Demand

Source: McKinsey (2017)

Economic analysis has adapted to the digital age in several ways. More attention is given to technology in growth models, such as allowing productivity gains from R&D to favour skilled labour over unskilled labour.

The 2020 Democratic Presidential Candidate Andrew Yang has claimed that the development of artificial intelligence and robotics means manual labour and other blue-collar work will be largely eradicated from the US economy. What are the economic consequences of this trend and to what extent will labour flexibility and quantity be reduced?

Anthony Shorrocks

Figure 1: Distribution of US labour share (%) by sector, 1840-2010

Credit: Gage Skidmore from Peoria, AZ, United States of America / CC BY-SA (https://creativecommons.org/licenses/by-sa/2.0)

Andrew Yang at the Iowa State Fair 2019

Labour economics now focuses on skills rather than education/human capital, and on “tasks” rather than “jobs”, with jobs viewed as bundles of tasks, repackaged when circumstances require (Autor 2013). Because AI targets jobs with predictable environments (since algorithms must cover every eventuality), recent refinements distinguish between manual and cognitive routine processes compared to non-routine tasks/ jobs, thus prompting the concept of “Routine-Biased Technical Change” (Acemoglu and Autor 2011). This framework emphasises complementarity between RAIA and certain types of labour, and predicts job growth in both tails of the distribution, at the expense of middle-range workers. A "U-shaped curve" for skills emerges, alongside increased polarization (Autor et al. 2003).

The impact on particular jobs depends on whether they are (i) RAIA complements/substitutes; (ii) routine.

Routine jobs – cognitive or manual/blue-collar – will contract, reducing opportunities for average-skilled workers while increasing demand for highly qualified and low-skilled people. In industrial robotics, repetitive/codifiable manual tasks are most at risk. Elsewhere humans will retain a comparative advantage for many simple physical tasks. In contrast, for non-routine cognitive tasks, high-skilled labour is more affected – negatively for substitutes and positively for complements.

Regarding specific occupations, Frey and Osborne (2017) list telemarketers, cashiers, legal assistants and taxi drivers among those most at risk. Drivers are noteworthy because large numbers are employed and the threat from self-drive vehicles is substantial and imminent. According to US Census data (reported on NPR website, February 5 2015),

“Truck, delivery, and tractor drivers” was the most common job category in 29 of the 50 States in 2014.

Jobs least likely to be automated involve specialized “human-oriented” or creative services: social workers, doctors, and primary school teachers to name a few. Overall, Frey and Osborne estimate 47% of US jobs are vulnerable over the next 20 years.

New employment opportunities fall into six broad categories:

(1) New-technology sector. RAIA has already generated new types of jobs in genetic sequencing, nano-technology and high-speed financial trading. Speech/language processing, predictive analytics etc. offer prospects for further job opportunities.

(2) Production spin-offs. RAIA application to established areas will generate opportunities for remote medical diagnoses, financial advice, home security etc.

(3) Demand spin-offs. Automation lowers costs, so price reductions release income to spend elsewhere. RAIA could also release resources by making certain expenditures redundant. Crime-prevention measures could become unnecessary if security cameras, facial recognition and AI-aided sentencing reduce crime; or medical resources conserved if individuals get medical warnings earlier, avoiding hospitalisation.

(4) Repackaging tasks. Jobs are redefined (and renamed) to redeploy redundant workers (e.g. “bank cashiers” become “account advisors”; “secretaries” become “receptionists/ assistants”).

(5) Insourcing. Robots undermine low-wage nation advantages, so proximity benefits (e.g. punctuality) may overtake cost factors, returning US manufacturing lost to globalisation (e.g. fashion garments). This is already happening with shoe production in Germany (Weiner 2017). Insourcing could reverse the decline in US manufacturing, but may cripple the development of countries dependent on manufacturing exports.

(6) Demographic trends. Ageing populations, wealthier households, consumer fads etc. generate new employment opportunities – mainly lowwage/low-productivity service jobs – irrespective of RAIA.

For these reasons (especially number 6), employment growth will be concentrated in health/ care, education, hospitality/leisure, and personal services.

The economic consequences of paradigm shifts (e.g. climate change) are almost impossible to assess with confidence since new analytical and empirical frameworks are needed to proceed beyond pure speculation. Unsurprisingly, predictions about the overall employment impact of RAIA differ widely. A recent study paints an especially optimistic scenario in which RAIA creates 133 million jobs globally over five years to offset 75 million destroyed (World Economic Forum 2018).

A clearer – and more informative – consensus emerges regarding the evolution of the sector & skill distribution. New RAIA-related jobs will be swamped by jobs created in low- productivity, human-centred occupations for the reasons listed above, and also because high-tech firms employ relatively few workers. For example, Google has only about 55,000

employees, less than 10% of the number employed by AT&T at its peak (Thompson, 2015).

The productivity dimension is important because secular stagnation associated with declining productivity is already of concern: US labour productivity growth rose from 1.5% (1974-1994) to 2.9% (1995-2004) but then subsided to 1.2% (2005-17) (BLS 2013).

Labour Flexibility

If full employment becomes unachievable in the RAIA era, job-sharing and reductions in working hours will partly help. However, some suggest the full employment goal should be abandoned, viewing unemployment due to human-robot replacement as an attractive prospect, with humans free to use time more rewardingly. People certainly fear losing income caused by unemployment but worry less if adequately compensated by “RAIA dividends”, akin to the Alaska Permanent Fund where every citizen in Alaska gets $1,000-$2,000 p.a. from the oil-bankrolled Fund.

Assuming full employment remains feasible, structural transformation can still cause transition problems for displaced workers and workforce entrants alike. The critical issue is moulding individual abilities to match the needs of an RAIA economy – more STEAM skills (Science, Technology, Engineering, Maths, and Arts); more creativity; more

person-to-person skills. Retraining (and job-switching) will become common throughout adulthood. However, three factors will ease the transition:

● Modern generations readily embrace new-technology, perceiving opportunities rather than threats.

● Geographical relocation may be unnecessary, unlike in the past when unemployment and job

● Most new employment will not be in high-tech jobs requiring advanced skills; on the contrary, low-skill jobs will increasingly dominate, perhaps leading perversely to most employees being overqualified for their jobs.

Longer-term, there are more difficult challenges. High-skill/ high-pay jobs are usually easy to fill, but lower-skill jobs are often stigmatised. Measures are therefore needed to repair the image of such jobs, e.g. renaming “cooks” as “chefs”. The gig-economy will also grow, with many people reliant on stopgap jobs lacking the benefits (healthcare, pensions) linked with full- time posts. Maintaining tax revenue will also be challenging in a gig-economy.

Distributional Concerns

One inevitable consequence of RAIA is increasing inequality in market incomes as employment polarises into high-skill/highwage and low-skill/low-wage jobs. This will exacerbate trends which

have already resulted in median real-wage stagnation for a generation in the US and to the “decline of the middle-class” which have together fuelled social discontent with inequality unprecedented since the Great Depression (Pressman 2007). These distributional shifts cause economic concerns as well as social turmoil. Low-income households have a higher propensity to consume, so rising inequality hampers efforts to maintain aggregate demand.

Combating rising inequality will be difficult given the United States’ aversion to redistributive taxation and fears that high taxes will cause the best workers to migrate abroad. An increasingly popular proposal is a basic income programme which separates income from work, ensuring that all humans have minimally adequate resources regardless of their employment status (Sheahen 2012). Such a plan would require a total revamping of the US tax and benefit system, unimaginable in current circumstances but conceivable if the social order breaks down as technology eliminates manual and blue-collar jobs, lowers incomes, and creates a permanent underclass of unemployable people. If intelligent machines take care of most work and provide robot-owners (potentially including the state) with unimaginable wealth, widespread redistribution of RAIA-surplus could result in a utopian world of increasing output, employment for all job-seeking humans and

unlimited robots.

Conclusions

Robot/AI evolution will eliminate certain jobs, but compensate by creating RAIA-related jobs, raising productivity elsewhere, and releasing resources for other purposes. Opinions differ on whether there will be a net gain from new technology, as has historically been the case. Optimists see a cornucopia of opportunity and benefits, with technology freeing humans who do not wish to work from day-to-day drudgery. From this perspective, RAIA offers the best chance of reversing recent stagnant productivity and growth in advanced economies. In contrast, pessimists worry that full employment will not be feasible in future, and a permanently unemployed underclass will emerge within a dystopian gig-economy, stoking inequality and social unrest. Either way, the current job structure will mutate, demanding enhanced skills and lifetime flexibility, at least for those in RAIA-related jobs, although perversely overall employment will likely shift to low-skill occupations. The latter will favour social and interpersonal attributes which may not match well with some job-seekers. Lastly, growing inequality in market incomes seems certain, prompting demands for redistributive mechanisms that were previously anathema in the US. ▪

Amilitary confrontation is at heart economic. Tactics can win a battle, but it is a country’s industrial capability – its abundance in natural resources, its manufacturing power, its technological expertise – that ultimately wins a war. Crushing Germany’s economy would ensure that she never waged war again. Yet, faced with this stark choice, the Allies decided to let the country continue existing; penalties and regulations that were meant to keep her in check were enforced. Keynes’ suggested alterations are a victim of the same miscalculation – any measures that were not directly aimed at rebuilding Germany, and Europe in general, would be met by the defeated country with resentment and resistance. Keynes sought to alleviate the pain, but not to remove the illness altogether.

This is best seen on the provisions relating to industry, which J.M. Keynes saw as more important than financial clauses in the Treaty not least because “the German Empire has been built more truly on coal and iron than on blood and iron". Germany's exploitation of the coal mines of Saar and of the Ruhr had made it the first purely industrial country on the continent. Thus, the future of the Saar – especially in the first decade – would determine Germany’s ability to rebuild its industry.

Neither the Treaty nor Keynes’ alterations provide a feasible solution, bearing in mind the country’s dependence on coal. What Keynes proposes is returning the Saar back to Germany unconditionally and without payment after a period of 10 years, in contrast to the Treaty’s prescription to hold a referendum, after the elapse of 15 years, to determine to whom the region should belong.

Meanwhile, the region should become an international zone, with its mines exploited by France (a compensation for the war-time destruction of industry in Northern France by the German army). Yet, it is precisely in this first decade that Germany, deprived of its main natural resources hub, will face economic hardship and even risk perishing, which becomes apparent when we analyse the country’s coal supply.

Before the war, out of Germany's maximum output of 191,500,000 tonnes of coal annually (all data in the essay comes from the Treaty itself, The Economic Consequences of the Peace or Wages of Destruction by Adam Tooze), 139,000,000t was consumed locally (excluding the coal used in the mining industry itself). It was secured by the Treaty that the proportion between the amount of coal consumed locally and the total output of Saar Basin would be the same is it was in 1913. Territorial loss, induced by the Treaty and the armistice, would cost Germany 60,800,000t yearly. Subtracting the demand for coal in mining and taking into consideration the reduced efficiency of the damaged industry (e.g. we know that in 1918 the total output was only 161,500,000t), Keynes estimated the postwar amount of coal left for local consumption at 100,000,000t.

Further 40,000,000t were demanded from Germany as compensation for the destruction of mines in France, Italy, Belgium and Luxembourg, leaving only 60,000,000t for local consumption. The Treaty-imposed territorial losses diminished the German population by 6,5mln (around one–tenth). The annual demand for coal was thus reduced, but "at the most extravagant estimate this [loss] could not be

Can a case be made that Keynes’ suggested alterations to the Treaty of Versailles’ contents on reparations, iron and coal were still too harsh on Germany and its economy?

Joanna Nowinska

Credit: Helen Johns Kirtland (1890-1979) and Lucian Swift Kirtland (died 1965) / Public domain

The signing of the Treaty of Versailles, 1919

put above 29,000,000t", decreasing the amount of coal needed for local consumption to 110,000,000t (50,000,000t above the amount determined by the arrangements of the Treaty).

The only alteration that Keynes introduces is renouncing the compensation made to Italy, Belgium and Luxembourg. Germany should provide France with a fixed amount 7,000,000t a year for ten years, supplemented by “an amount of coal equal to the difference between the annual production before the war of the coal mines of the Nord and Pas de Calais, destroyed as a result of the war, and the production of the mines of the same area during the years in question” which was not to exceed 20,000,000t. Thus, if we subtract from Keynes’ estimate of 100,000,000t of coal left for local consumption even a conservative figure of 15,000,000t, we are still below the 110,000,000t demanded annually. The alterations are clearly less harsh, but they still sentence an entire population to massive shortages and resulting discontent.

In 1919, without the mines of Saar Basin and Alsace-Lorraine, the output of coal was already only

50,000,000t. What is more, industry efficiency was largely decreased – in 1920, manufacturing in Germany will reach only 59% of the 1913 level. Had the Treaty been fully implemented, the country would have to divert entirely towards agriculture not to starve its population. However, as Keynes points out, the productivity of soil reduced to 60% and the effective quality of livestock to 45% of the pre-war level. A Germany entirely reliable on agriculture would be destroyed by the measures proposed.

At the Paris Peace Conference, Count Brockdorff-Rantzau presented the Report of the German Economic Commission, contending that Germany has transformed from an agricultural state to an industrial one and "so long as she was an agricultural State, Germany could feed forty million inhabitants. As an industrial state she could insure the means of subsistence for a population of sixty seven millions (…) to put the Peace conditions into execution would logically involve, therefore, the loss of several millions of persons in Germany". Deindustrialization of Germany would not only lead to her economic decline, but also to mass reduction of her population. It was imperative that the Weimar Republic

remained an industrial state and – as shown previously in the coal supply calculations – Keynes’ proposal did not satisfy that requirement.

Similarly, in the second aspect – reparations –Keynes’ proposal is slightly less harsh, but not sufficiently. He suggests that Germany should not be forced to pay more $10 billion and should do so in thirty annual installments, beginning in 1923. Furthermore, if the country cedes all of its war material and equipment as well as all the state property acquired in occupied territories, the sum should be lowered to $7.5bn, without interest.

The Reparation Commision (which the Treaty establishes for the purpose of determining the exact sum) increases Keynes’ nominal figure threefold. The reparations are set at 132 billion marks ($33bn), out of which however 83bn marks were to be allocated in bonds that were likely to never become payable. Thus, the remaining 50bn marks (around $12.5bn) were not an outrageous figure when compared to the $10bn that Western European countries owed to the United States (who during the war had provided especially Britain and France with extensive loans).

Furthermore, $12.5bn amounted to only around 160% of Germany’s GDP in 1919. Overall, the Weimar Republic ended up paying only 20bn marks ($5bn) – half of the figure prescribed by Keynes and 15% of what the Commission required. Throughout the 1920’s and early 1930’s, Germany not only systematically postponed and flouted the payment of reparations, but it worked to convince the Western powers to renounce the reparations altogether. The issue with the reparations was not its exact figure –Keynes’ $10bn, although less harsh, still imposed a considerable and (according to the German society) unjustified burden.

As The Economist has put it “Germany’s [defying of reparations] had less to do with its capacity to pay than its incentives”. Simply lowering the figures, as Keynes did, was not enough to halt the rising German resentment. The country should have been forced to pay and invest for the sake of European reconstruction, from which she too would benefit. Instead, the Weimar Republic was left with the impression that it had fallen prey to Western imperialist financial exploitation. ▪

References

Business Down Under - Furst

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[2] As reported in the Financial Times, ‘Australia aims for rapid post-Brexit trade deal with Britain’, 25 July 2019 https://www. ft.com/content/a306dd1e-ae9d-11e9-8030-530adfa879c2

The 2017 Lowy Lecture: UK Foreign Secretary Boris Johnson, 27 July 2017, The Lowy Institute

[3] House of Commons Briefing Paper, Number CBP 8282, 6 February 2020 ‘Statistics on UK trade with the Commonwealth’

[4] Department for International Trade, report ‘UK Trade in Numbers’, September 2019

Office for National Statistics, UK Balance of Payments - The Pink Book, 31 October 2019

[5] Australian Government, Department for Foreign Affairs and Trade, report ‘Composition of Trade 2018’, July 2019

[6] Australian Government, Department for Foreign Affairs and Trade, ‘United Kingdom country brief’, https://dfat.gov.au/geo/ united-kingdom/Pages/united-kingdom-country-brief.aspx

[7] Ibid

[8] Australia Trade and Investment Commission, HM Government, Australian-British Chamber of Commerce, joint report ‘Strong Ties, Growing Stronger Australia-United Kingdom investment relationship’, July 2018

[9] The Society of Motor Manufacturers and Traders, Parliamentary Briefing ‘international trade update’, July 2019

[10] The Society of Motor Manufacturers and Traders, ‘2019 UK Automotive Trade Report’, October 2019

[11] Department for Environment, Food, and Rural Affairs, Department for International Trade, joint report ‘UK Food and Drink - International Action Plan’, October 2016

[12] As reported in the Financial Times, ‘Australia aims for rapid post-Brexit trade deal with Britain’, 25 July 2019 https:// www.ft.com/content/a306dd1e-ae9d-11e9-8030-530adfa879c2

[13] Commons Select Committee ‘Trade between the UK, Australia and New Zealand examined’ 23 May 2018.

[14] Lords Select Committee ‘European Union Committee Brexit: agriculture’, chapter 3 ‘Future trade in agri-food products’, 3 May 2017

[15] Australian Parliament, ‘Inquiry Into Australia’s Trade And Investment Relationship With The United Kingdom’, chapter 4 ‘Possible implications of 'Brexit' for Australia's trade with the UK and the European Union’, October 2017

[16] Ibid

[17] Australia Trade and Investment Commission, HM Government, Australian-British Chamber of Commerce, joint report ‘Strong Ties, Growing Stronger Australia-United Kingdom investment relationship’, July 2018

[18] Ibid

[19] As reported in The Australian, ‘Mayor wants to build a ‘fintech bridge’ to the City of London’, 19 February 2019, https://www.theaustralian.com.au/business/financial-services/ mayor-wants-to-build-a-fintech-bridge-to-the-city-of-london/ news-story/d139a865aaae3d83410624cf6ad6286b

[20] Australia Trade and Investment Commission, HM Government, Australian-British Chamber of Commerce, joint report ‘Strong Ties, Growing Stronger Australia-United Kingdom investment relationship’, July 2018

[21] Downer, Alexander, 2018, ‘Australia and a Post-Brexit Britain’, The Commonwealth Journal of International Affairs: The Round Table, 107:1, 21-31

[22] Universities UK (UUK), ‘Australian and British university leaders look to map out post-Brexit ties’, 5 March 2018 https:// www.universitiesuk.ac.uk/International/news/Pages/Australian_British_-Universities_post_Brexit_ties.aspx

[23] Times Higher Education, ‘Brexit ‘promises bright future’ for Australia-UK university ties’, 27 June 2019, https://www. timeshighereducation.com/news/brexit-promises-bright-future-australia-uk-university-ties#survey-answer

[24] As reported by The Guardian, ‘Britain will aim for freedom of movement deal with Australia’, 18 September 2019, https:// www.theguardian.com/politics/2019/sep/18/britain-will-aimfor-freedom-of-movement-deal-with-australia

As reported by the Sydney Morning Herald, ‘Morrison government rules out visa-free travel between Australia, UK’, 6 January 2020, https://www.smh.com. au/world/europe/morrison-government-rules-out-visa-free-travel-between-australia-uk-20200102-p53o7l. html?utm_medium=Social&utm_source=Facebook&fbclid=IwAR07_RZl6iuH6eX9DAhJCqV-IT_-RYHJ2Hngr1Axn-igJRvq1QMAd7hiCSY#Echobox=1578256501

[25] Johnson, Boris, ‘The Aussies are just like us, so let’s stop kicking them out’, The Telegraph, 25 August 2013 https://www.telegraph.co.uk/news/politics/10265619/TheAussies-are-just-like-us-so-lets-stop-kicking-them-out.html

[26] Lesh, Matthew, ‘Brexit is a chance to rebalance Britain’s wonky immigration system’, CapX, 16 October 2019, https:// capx.co/brexit-is-a-chance-to-rebalance-britains-wonky-immigration-system/

[27] British Foreign Policy Group, BMG Research, Henry Jackson Society, joint report ‘Behind Global Britain: Public Opinion On The Uk’s Role In The World’, April 2019.

[28] MediPeople Group, ‘Brexit The Good News – Australian Docto

Jobs In The UK’, 3 September 2017

[29] Friends of Europe, policy briefing ‘How To (Br)exit: A Guide For Decision-Makers’, March 2017

[30] As reported by The Spectator, ‘Anglo-Australian relations, post Brexit’, 11 August 2018, https://www.spectator.com. au/2018/08/anglo-australian-relations-post-brexit/

[31] As reported by the ABC, ‘Australia-UK trade deal could cause 'turmoil' in Wales amid Brexit fallout’, 6 May 2018, https://www.abc.net.au/news/2018-05-07/australia-uk-tradedeal-could-hurt-wales-first-minister-says/9730856

[32] Submission 6.1 to the Australian Parliament, ‘Inquiry Into Australia’s Trade And Investment Relationship With The United Kingdom’, October 2017

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People Behind the Issue

Editor-in-Chief

Patrick O'Keefe

Interviewees

Paul Milgrom

Jason Reed

Andrew Chang

Writers

Rob MacLennan

Fee Robinson

Patrick O'Keefe

Yasmin Begum

Georgia Clayton

Edward Furst

Keyi Yu

Timothy Butterfield

Freddie Poser

Jack Ballingham

Curran Snell

Tom McIver

Isaac Lamb

Keir Bradwell

Freddy Fossey-Warren

William Rowland

Peter McLaughlin

Spencer Payne

Tohin Munshi

Daniel Jordan Davidson

Sean Hannigan

Zachary Marsh

Laurence van Someren

Sam Kwiatkowski

Xinyi Qu

Archie Bowman

Anthony Shorrocks

Joanna Nowinska

Photography

Chris Henry Lubo Minar

Matt Sylvester

Vlad Busuioc

Bruno Oliveira

Andres Jasso

Jason Leung

Juan Cruz Mountford

Laura Chouette

Kevin Bhagat

Zhang Kaiyv

Ben Cutts

Holker Link

Rinson Chory

Mauricio Fanfa

Lena Myzovets

Evi T.

Kilarov Zaneit

Daniel James

Carlos Roso

Patrick Hendry

Kimberly Farmer

Marcus Spiske

James Newcombe

Aswin Mahesh

Elliott Stallion

Deniz Fuchidzhiev

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Thijs Stoop

Sebastian Grochowicz

Bill Oxford

Maximilian Schaffer

Jay Mullings

Angel Bilton

Ben Shread

Eva Meyersson Milgrom

Special Thanks

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Yasmin Begum

Kristy Robinson

Kiran CK

Arnaud Jaegers

Sunyu Kim

Amarnath Tade

Ivan Bandura

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Gage Skidmore

Dexter Fernandes

Helen Johns Kirtland

Lucian Swift Kirtland

Kevin Chinchilla